America's Next Top Value Stock

Though value investors have been some of the market's most successful investors, finding good stocks at bargain prices is far from easy. Markets aren't as efficient as some university professors might lead you to believe, but 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 to ensure that you invest in the stock equivalent of Brad Pitt, rather than Kato Kaelin.

Fortunately, 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 priced at less than twice their book value -- a measure often used by value investors. Below, I've listed some of the highlights from my search, but you can see all the latest qualifiers by running the same screen on the CAPS screener.

Source: Capital IQ, a division of Standard & Poor's, Yahoo! Finance, and CAPS as March 6.

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

No twinkle in these stars
Whether we're talking about MGM Mirage, Las Vegas Sands (NYSE:LVS), or Wynn Resorts, one thing is clear -- CAPS members do not have a rosy outlook for gaming companies, largely because of these businesses' looming piles of debt. Building multibillion-dollar casinos can bring in the guests, but it's also brought on a hefty debt load for most companies on the Strip. Wynn, for instance, had more than $4 billion in debt at the end of the year. With the company's operating income falling into the red in the fourth quarter, trouble could be brewing.

JPMorgan Chase, meanwhile, was a banking-sector favorite for a while, but it's since been knocked down to the level of Citigroup (NYSE:C). CAPS members are seemingly shifting from being positive on the best banks to frowning on practically the entire sector. And though Hewlett-Packard's three-star rating puts it above JPMorgan and Wynn, many CAPS members just don't see it managing to eke out market-beating performance in the face of the global recession.

A five-star is born!
Whichever type of communications you're, uh, communicating about -- cellular, landline, or data -- AT&T is one of the leaders. The stock currently trades at less than 10 times trailing earnings, and it's yielding 6.5%. Though debt can mean death these days, AT&T also appears to have its interest payments well covered. So what's not to like? Not too much, if you ask CAPS members. Nearly 4,400 of them have weighed in on the stock, and more than 94% of that bunch have given it a thumbs-up.

As well-liked as AT&T is, though, its four-star rating couldn't top Valero's perfect five stars. CAPS members like this week's top value stock for a number of reasons, including Valero's current valuation, the lack of new refining capacity in the U.S., and, as ametts1 highlighted last month, the potential for a rebound in oil prices:

Most experts expect oil to return to $70 / barrel in the not-[too]-distant future. US refining capacity is fixed, and not easily expanded -- and the US will continue to need plenty of oil in the foreseeable future. All of this adds up to a strong competitive position for [Valero] as oil prices rise.

I find it hard to disagree with the bulls on most points, and I'd add into the mix Valero's added benefit of refining "disadvantaged" crudes such as sour crude. This capability allows the company to achieve higher refining margins than competitors, particularly when prices for light sweet crudes are higher.

Make your vote count!
Do you agree that Valero 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 cast your vote for any other stocks that you think should be in the running.

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