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 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 often used by value investors.

Source: Yahoo! Finance and CAPS as of Feb. 4.

As you can see, though 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
Is Sony losing its edge in the electronics market? Many CAPS members seem to think so. And that thesis is only reinforced by taking a quick peek at Sony's financials. Sony's revenue for the 12 months ending in September was a scant 4% above the revenue reported in 2000. Meanwhile, the company has seen its gross margins steadily erode from 25.5% in 2000 to 19.4% for the year ending in September.

Of course, the ugly financial position only mirrors the scars that the company is taking on the consumer electronics battlefield as it tries to beat out tough competitors like Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), and Nintendo.

With a two-star rating to match Sony's, PNC Financial doesn't get much love from the CAPS community either. Despite the bank's low valuation, CAPS members are still giving leery looks to the banking sector as a whole. But at least PNC won't be lonely with its two-star rating. A host of other major banks, including Fifth Third Bancorp (NASDAQ:FITB), M&T Bank, and Regions Financial, are also sitting in the two-star dunce corner.

Humana's stock is stuck in the CAPS purgatory of three stars; not quite as bad as stocks like PNC and Sony, but not quite good enough to be considered among the top 40% of rated stocks. But with a low valuation, a strong balance sheet, excellent cash flow, and a good position in the health-care industry, I think Humana may be getting a bit shortchanged here.

A five-star is born!
There's nothing like a recession to really beat the living daylights out of a cyclical company like Nucor. All that's needed is a glance at the steelmaker's results to confirm this. Between 2008 and 2009, Nucor's revenue dropped by more than half and a sweet $1.8 billion profit turned into a nasty $294 million loss.

But Nucor has a strong balance sheet behind it and a long-term focus on its business that should be able to see the company through to the sunny days on the other side. On CAPS, more than 1,600 members seem to see it the same way and have rated the stock an outperformer.

Though Nucor's four-star rating should at least put the stock on your radar, it wasn't enough for it to edge out this week's top value stock, Honda.

What's so great about Honda? Well, for one, the company hasn't declared bankruptcy. It also hasn't seen fit to issue massive recalls on its vehicles due to major safety issues (I'm looking at you, Toyota). But with 1,612 outperform ratings on CAPS, there's obviously more to it than what Honda isn't.

Fortunately, we can tap into what CAPS members have been saying. Last month, CAPS member blue2fire became one of the Honda bulls and had this to say:

I believe their innovation will see them through to the future.

Their emphasis on greener cars through the entire range (the CR-Z comes to mind) is something that other manufacturers will follow. I also like the focus on core offerings and refusal to diversify into the Truck business and production of bigger capacity engines that has served them splendidly in the downturn.

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