America's Next Top Value Stock

Value investors have been some of the most successful investors out there, but finding good stocks at bargain prices is far from easy. Although 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 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 145,000 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 that value investors often use.

Source: Yahoo! Finance, and CAPS as of Jan. 7.

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

No twinkle in these stars
We all know that retail has been struggling, but is Macy's really a terrible stock? According to CAPS members it is.

Citing the company's ugly balance sheet -- which features a debt-to-equity ratio of 192% -- as well as its falling sales and the struggles of retail in general, CAPS members have rained down red thumbs on Macy's stock. In fact, the CAPS community hasn't been very kind to retail in general. But if you must go with retail, CAPS members seem to think that American Eagle Outfitters (NYSE:AEO) is one of the few retailers worth your time.

Moving on from one hated industry to another, it's no surprise that Citigroup has won the ire of the CAPS community. Though Citigroup isn't quite at death's door anymore, the global bank still looks like a shadow of its precrisis self. While some investors may be willing to test the waters because of Citi's low valuation, most are still leery about what bombs could still go off on its balance sheet.

Life insurer Genworth Financial isn't quite in the CAPS doldrums the way Citigroup and Macy's are, but thanks in part to the stock's huge run-up from early last year, it's stuck in neutral with a three-star rating.

A five-star is born!
Why Marsh & McLennan? The better question might be "why not?"

The company is a leading insurance broker that's managed to expand its operating profit margins over the past few years, even though its bottom line has recently been hurt by restructuring and goodwill. It has a solid balance sheet, churns out significant cash flow, and pays a healthy dividend. What else do you want?

Apparently, CAPS members want just a little more than Marsh has to offer, since they've left it one star short of a perfect rating. But where Marsh wasn't able to win over CAPS members' hearts, Berkshire Hathaway (surprise, surprise) has.

Now I can reiterate all the great aspects of Berkshire -- from Buffett to the operating companies to the investment portfolio -- but most readers have heard that all before. The more interesting question in my mind is: Why Berkshire now?

It's really pretty simple, and it has a lot to do with the stock's inclusion on the list above. Simply, Berkshire is a stock to own now because it's all the great things that it's ever been, but now it's also cheap.

CAPS member DanielSparks picked up on the "cheap" theme late last month when giving the stock a thumbs up:

Undervalued. Managed by one of the greatest minds in the world. When has Warren Buffett not outperformed the market? He has a lot of catching up to do.

Make your vote count!
I've already given Berkshire an "outperform" rating in my CAPS portfolio, but what do you think? Do you agree that Berkshire 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.

We culled the list above down to the best stocks. Now take a hard look at your portfolio and make sure you're not hanging on to any terrible investments.