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 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. Below is a selection from the array of companies that fall into this category, but you can also run the same screen that I did on the CAPS screener.
|
Company |
Book Value Multiple |
1-Year Stock Performance |
|
|---|---|---|---|
|
Dawson Geophysical |
1.0 |
(60.7%) |
***** |
|
E*Trade Financial |
0.3 |
(64.9%) |
**** |
|
Evergreen Solar |
0.6 |
(82.1%) |
*** |
|
DryShips |
0.5 |
(91.3%) |
** |
|
JPMorgan Chase |
1.0 |
(14.2%) |
** |
Source: Capital IQ, a division of Standard & Poor's, Yahoo! Finance, and CAPS as of June 1.
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
I have to be honest, I'm not so sure I agree with the CAPS community on JPMorgan -- or its financial cousin Goldman Sachs
Don't get me wrong, the financial sector is still about as clean as a college freshman's dorm room. However, I do think there are some institutions -- such as JPMorgan and Goldman -- that have an edge over the rest.
The rating on DryShips, on the other hand, is one that I can completely agree with. For a while, a raging market for dry bulk shipping services helped elevate DryShips' stock to untold heights. But long-held concerns over the company's management now seem to be coming back to haunt the stock and are causing many CAPS members to believe that trouble is in store for the company.
Evergreen Solar's three-star rating isn't terrible, but considering that Suntech Power
A five-star is born!
E*Trade has turned out to be a great brokerage, but a pretty dismal failure as a bank. The company took on mortgage loans and mortgage-backed securities as the loan market got out of control, and is now seeing its bottom line hammered as it writes down its balance sheet.
CAPS members, though, think that E*Trade and its stock -- which is currently priced lower than a large cup of Dunkin' Donuts coffee -- is a good bet, as the broker looks to capitalize on its core strengths while beating back the banking reaper that it called upon itself.
E*Trade's four-star rating may make that stock worth a look, but it's still one star behind this week's top value stock: Dawson Geophysical. For the keen CAPS watchers out there, it may not be surprising that this five-star stock comes out of the energy equipment and services sector, which is one of CAPS members' favorite industries.
For a take on what makes Dawson such a great pick, I'll pass the ball to one of CAPS' best-performing members, TMFPlatoish, who gave the stock a green light way back in 2006 and said:
Dawson looks like a nice small cap, medium growth story in a strong services niche which should be in demand for quite some time. Their management team is quite transparent, continually learns how to tell the investment community what it needs to know, takes the needs of their customers quite seriously, and is truly invested in their employees. They should outperform the market going forward.
Make your vote count!
Do you agree that Dawson Geophysical 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.
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