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 of 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 125,000 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 | |
|---|---|---|---|
|
Goldman Sachs (NYSE:GS) |
0.8 |
(60%) |
*** |
|
Consolidated Edison (NYSE:ED) |
1.1 |
(20%) |
***** |
|
State Street (NYSE:STT) |
1.3 |
(48%) |
* |
|
Juniper Networks (NASDAQ:JNPR) |
1.5 |
(50%) |
*** |
|
Texas Instruments (NYSE:TXN) |
1.9 |
(54%) |
**** |
Source: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and CAPS as of Dec. 19.
As you can see, though these stocks all carry value-like multiples, the CAPS community doesn't think that all are worthy of your investment dollars.
No twinkle in these stars
Is the financial trauma over with? There's no shortage of "experts" who have been trying to make that call, but you'd probably have as much luck flipping a coin as you would trying to figure out who's right. One thing's for sure, though, the members of the CAPS community aren't keen on financial stocks right now. Though State Street announced 8% growth in operating earnings per share for the third quarter, and has said that it expects full-year operating earnings to be at the high end of its projections, CAPS members have stuck to their bearish calls on the stock. Nearly 60% of the CAPS All-Stars who have weighed in on State Street think it will continue to lag the broader market.
Even Goldman Sachs, which outshines competitors like Citigroup (NYSE:C) and Morgan Stanley (NYSE:MS) on CAPS, carries a pretty uninspiring three-star rating and has received some harsh words from some of CAPS' top players. CAPS All-Star dexion10, for instance, gave Goldman a big red thumb recently and said: "DON'T LET THE SMOOTH TASTE FOOL YOU. Goldman Sachs doesn't have a business plan or business model that works anymore."
Juniper Networks joins Goldman in that no-man's-land of three stars, and though much of the recent ratings have been positive, some CAPS members still think the stock's valuation is too high.
A five-star is born
The "semiconductors" tag on CAPS sports a four-star rating, suggesting that CAPS members have an overall positive view on that sector. And with its four-star rating, Texas Instruments certainly fits into that bullish outlook. The company recently cut its fourth-quarter guidance, but CAPS members still like it thanks to its long-term prospects and lack of debt.
Texas Instruments' four-star rating, however, leaves it just short of claiming this week's top spot, which goes to five-star-rated electric utility Consolidated Edison. Boring? Maybe so, but boring can be beautiful, particularly when the economy seems to be crashing down all around us. CAPS members not only appreciate the safety of the utility, but really like the 6% dividend. In late October, valari25 gave the company a thumbs up, saying:
I think once the hedge fund and mutual fund selling goes away, utilities are going to come back huge. They pay their dividends, offer great security for capital and will always give a good nights sleep for investors.
Make your vote count
Do you agree that Consolidated Edison 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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