America's Next Top Value Stock

Though value investors have been some of the most successful investors out there, finding good stocks at bargain prices is far from easy. Though markets aren't as efficient as some university professors may want to tell you, they generally do a pretty good job pricing stocks. So while there are good deals out there, you're going to have to break a bit of a mental sweat if you want to make sure that you're investing in the stock equivalent of Brad Pitt, not Kato Kaelin.

Fortunately for us, in the search for stock market values, we have the 125,000 members of The Motley Fool's CAPS community voting on which stocks are true stars and which are just posers. To gather some ideas, I've dug up a handful of companies valued at less than twice their book value -- a measure often used by value investors. Below is a selection from the array of companies that fall into this category, but you can also run the same screen that I did on the CAPS screener.

Sources: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of Feb. 20.

As you can see, though these stocks all carry value-like multiples, the CAPS community obviously doesn’t think all of them are worthy of your investment dollars.

No twinkle in these stars
There is plenty of debate over what the near future holds for the economy at large, but there seems to be far more unanimity when it comes to homebuilders. Though Toll Brothers is lowly with its one-star rating, it certainly isn't lonely. Among U.S. homebuilders, a rock-bottom rating from CAPS members is more the rule than the exception, and Toll competitors like Beazer Homes and Hovnanian (NYSE:HOV) share Toll's one-star shame.

And when it comes to stocks to avoid, Bed Bath & Beyond and DryShips aren't far behind. Recent comments about Bed Bath & Beyond on CAPS suggest that investors see the company facing both the tough economy as well as increased competition from larger low-price retailers like Wal-Mart (NYSE:WMT). As for DryShips, while quite a few CAPS members see the company benefitting from an eventual economic recovery in both the U.S. and China, there is still too much concern over the company's management for more members to flip their thumbs up.

A five-star stock is born!
The price of oil has descended drastically from the dizzying heights that it reached last summer, but the number of oil bulls hasn't seemed to change all that much. Some who were burned by oil's collapse have fled, but many who were concerned about high prices have gotten much more bullish at these low levels. A rebound in oil prices -- even if it doesn't mean a return to $150-a-barrel oil -- would certainly bring investors and customers running back to Halliburton. For the present time, though, economic concerns are keeping CAPS members from tipping Hal's stock up and over that four-star ledge.

That leaves us with Trinity Industries -- a company that Joe-on-the-street might have a tough time identifying, but one that has been given a thumbs-up by more than 1,000 CAPS members. The company recently reported lower earnings in both its fourth quarter and full year along with a plummeting backlog for railcars -- its largest business segment. However, management, along with a number of CAPS members, thinks the company will benefit from its diversification, particularly in areas like road construction and wind towers.

As CAPS member bobbyabull put it earlier this month:

Trinity has a good product mix - railcars, barges, highway construction products and wind towers. Based on earnings guidance of $1.65 per share for 2009, p/e and peg are low. Dividend (safe) is yielding 2.60% down here, and the 52 wk range is $9-$41. They even buyback stock from time to time. Accumulate in dips, scale back whenever the stock approaches $20 and you'll make money, trust me...

Make your vote count!
Do you agree that Trinity Industries could be America's next top value stock? Click over to CAPS and let the rest of the community know what you think. And while you're there, you can log your vote for the other stocks that you think should be in the running.

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