5 Value Stocks You Should Know

Finding new stock ideas is challenging for all investors, but it's particularly difficult for new investors who may have a limited understanding of key financial metrics and accounting.

Sure, stock screens are great, but they're only as good as their users' input. If, for example, you don't know what "return on equity" or "price to book" means, a screener is of little use.

It's about to get easier
With that thought in mind, we at the Fool combined the investing knowledge of our top analysts and data from our Motley Fool CAPS screener to come up with four preset model screens -- Value, Dividend, Small-Cap, and High-Growth.

For our Value screen we asked Motley Fool Inside Value advisor Philip Durell what he looks for in promising value stocks. Among other things, he focuses on out-of-favor stocks with below-market average valuations, modest debt, strong business models, and four- and five-star CAPS ratings.

That last point is particularly important, because we've found that these highly rated stocks have outperformed the market as a group by 12 and seven points annually, respectively, from November 2006 to July 2008.

And now, for the stocks
Using the preset value CAPS screen, here are five value stocks you should know about:

Source: Motley Fool CAPS, as of Aug. 18, 2008.

Are these all dirt-cheap dream stocks? Only time will tell, of course, but in the meantime, we invite you to learn more about these promising growth companies on Motley Fool CAPS. You can get started by heading to CAPS -- it's 100% free.