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 160,000-plus 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 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
During the financial meltdown, casinos stocks MGM, Wynn (Nasdaq: WYNN), and Las Vegas Sands (NYSE: LVS) all got hit with heavy selling pressure as investors worried about a slowdown in spending and the casinos' considerable debt loads.

First-quarter results for both Wynn and Sands should have gone a long way to comfort investors. Both companies saw results jump considerably from last year and though Sands reported a loss and Wynn had only a slim profit, EBITDA for both companies now comfortably covers their interest commitments. Notably, both companies had big contributions from their presences in Macau.

MGM, on the other hand, saw its year-over-year results slide. Not only is the company more dependent on the sluggish-to-recover Las Vegas market, but its huge City Center gamble dragged down results with a first-quarter operating loss and a non-cash impairment charge. And while the company has made strides in making sure creditors won't move in quite yet, it's hard to say that MGM is in a comfortable balance sheet position.

Though MGM's stock may be trading at less than twice book value, I'm inclined to agree with the CAPS members' two-star rating. The company's debt load and lackluster results make me want to see an even bigger discount before getting too excited about the stock.

As for JetBlue, I may be even less inclined than CAPS members to consider the stock. Sure, it's possible to make money in airline stocks if you buy and sell at the right time. But I like to find companies that I want to invest in for the long term and the tough competition, tight margins, and huge, ongoing capital spending requirements in the airline industry don't make it a particularly attractive hunting ground.

Rounding out with Smith & Wesson, the CAPS community has given the stock one more star than MGM and JetBlue, but its three-star rating still suggests that CAPS members are pretty uninspired by it. Once again, I'm going to agree with the crowd on this one. Though the stock's low valuation does make it at least a consideration, the business doesn't seem to be doing a whole heck of a lot, and management's decision to increase the share count by more than 25% while the stock's valuation is so low rubs off some of the luster.

A five-star is born!
Now that we've left the riffraff behind, we can move onto a stock that CAPS members think is worthwhile, E*Trade.

Amazingly, E*Trade seems to be successfully clawing its way back. That's nice to see because I've always thought it was a good company that simply got itself in a lot of trouble by losing focus on what it actually did well. While the company isn't quite out of the woods yet, it seems to be moving in the right direction and the low valuation should give investors some cushion against bumps in the road -- or possibly inspire an acquirer to step in.

But the four stars that CAPS members have given E*Trade leave it one star shy of topping this week's top value stock, ConocoPhillips.

Now I know what you're thinking, "Big oil? How boring!" I don't disagree. And on top of that, there's a huge pall over the entire oil industry as the bloom of oil continues to expand in the Gulf of Mexico.

But the fact is that oil is still a hugely important commodity around the globe and there will continue to be hefty sums of money made in the industry for the foreseeable future. A massive goodwill impairment led to a belly flop for Conoco in 2008, but historically the company has delivered very attractive returns for its shareholders. And as a big fan of dividends, I find it hard to overlook the stock's 3.9% yield.

But don't take it from me. Earlier this year, CAPS member ScottishPete joined the 5,000-plus Conoco fans on CAPS, writing: "Integrated oil company with plenty of international upstream drilling presence to secure long term growth to balance the volatile downstream marketing end of the oil business."

Make your vote count!
Do you agree that ConocoPhillips 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.

What's better than an outperformer? An outperformer that nobody else knows about.