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 135,000 members of The Motley Fool's CAPS community voting on which stocks are true stars and which are just posers. To gather 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; you can run the same screen that I did on the CAPS screener.
|
Company |
Book Value Multiple |
1-Year Stock Performance |
CAPS Rating
|
|---|---|---|---|
|
Sprint Nextel |
0.8 |
(43.6%) |
** |
|
KB Home |
1.3 |
(26.0%) |
* |
|
UnitedHealth |
1.4 |
(4.6%) |
***** |
|
GameStop |
1.5 |
(51.3%) |
*** |
|
Nuance Communications |
1.8 |
(22.9%) |
**** |
Source: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of June 26.
As you can see by their star ratings, although these stocks all carry value-like multiples, the CAPS community doesn't think that all are worthy of your investment dollars.
No twinkle in these stars
It probably shouldn't be too surprising to find KB Home stuck at a rock-bottom one-star rating, given the state of the housing market. The stock is down more than 80% from its pre-recession levels, but CAPS members apparently think that KB's stock still has more room to fall.
Moving on to Sprint Nextel, it's not as if CAPS members don't like telecom companies -- both AT&T
GameStop may not be as low on the list as KB Home or Sprint, but its three-star rating is hardly enticing. While many CAPS members like the company, some are concerned about competition, particularly in the area of pre-owned games.
A five-star is born!
Voice recognition software may not be on the tip of your tongue when it comes to necessities during the recession, but Nuance was still racking up sales during its first quarter. Not only is Nuance moving in the right direction financially, but members of the CAPS community have given it a strong vote of confidence.
Nuance's four stars left it one star shy of the top spot, which goes to health-care service provider UnitedHealth. UnitedHealth has seen its stock take a tumble over the past year thanks to numerous concerns, including the recession and potential health-care reform.
But most CAPS members have been unfazed by these concerns. The bulls include CAPS All-Star Kinzo, who gave the stock a thumbs-up in mid-2008:
Huge competitive moat through it's large customer base will give this MCO (Managed-Care Organization) a distinct advantage over it's competitors and inhibit new entrants. Oh and it's undervalued right now too. The fear is nationalized health care, but I honestly do not see that happening overnight if at all.
Make your vote count!
I've already given UnitedHealth an outperform rating in my CAPS portfolio, but what do you think? Do you agree that UnitedHealth 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, log your vote for the other stocks that you think should be in the running.
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