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 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 |
CAPS Rating (out of 5) |
|---|---|---|---|
|
Williams Companies |
1.1 |
(55%) |
**** |
|
Solarfun Power Holdings |
0.8 |
(79%) |
*** |
|
ProLogis |
0.5 |
(73%) |
** |
|
Occidental Petroleum |
1.7 |
(24%) |
***** |
|
Lennar |
0.4 |
(32%) |
* |
Source: Capital IQ, a division of Standard & Poor's; Yahoo! Finance; and CAPS as of Jan. 9.
As you can see, though these stocks all carry value-like multiples, the CAPS community obviously doesn’t think that all of them are worthy of your investment dollars.
No twinkle in these stars
Owning a homebuilder stock over the past couple years has been about as anxiety-producing as bungee-jumping in a foreign country where you don't speak the language -- you don't know exactly what's going to happen, you just know that you're falling fast. The picture hasn't changed much recently, as lower home sales have pounded Lennar and rivals like KB Home
But there's a more recent twist in the mix for Lennar, as shyster-turned-sleuth Barry Minkow raised questions about some of the company's business practices -- including saying that its joint ventures were operated as Ponzi schemes (or should I say Madoff schemes?). The company has vigorously refuted the claims, but Minkow or no Minkow, CAPS members aren't having any of Lennar, slapping it with a bottom-of-the-barrel one-star rating.
Sticking to that general area, real estate investment trust ProLogis may not be selling residential homes, but its focus on owning industrial distribution facilities hasn't been too enticing to CAPS members. Though the stock has attracted more fans than Lennar, it has enough detractors to end up with just a two-star rating. CAPS All-Star jgseattle shared some thoughts at the end of December: "I think most of the REITs are in trouble. PLD has had a great run from $2 to $12 so I am going against this trend as it may be overdone."
And finally, Solarfun may have a happy-go-lucky name, but holding shares of alternative energy companies -- whether it be Solarfun or competitors like Suntech Power
A five-star stock is born!
With a four-star rating, Williams Companies is definitely worth checking out. The company is a major player in the natural gas market, and many CAPS members think it's well-positioned for a resurgence in energy prices. Some CAPS stock pickers looking to follow the pros have also noted that Carl Icahn's fund owns a sizeable stake in the company.
Williams didn't quite have what it takes to rank as this week's top value stock, though, as fellow energy company Occidental Petroleum edged it out. So why are CAPS members so positive on Occidental? For some of the same reasons that they like Williams -- a turnaround in energy prices would be a boon for the company, and well-respected value investor Davis Selected Advisors is a top shareholder. The company also has a very strong balance sheet, which should position it well to weather falling energy prices and the global economic storm.
Most recently, though, one of the top CAPS members, TDRH, weighed in with his thoughts, suggesting that inflation may eventually kick in thanks to the Federal Reserve's crisis-fighting actions, which will help companies like Occidental:
Obviously the Econ courses I took in college do not help me to fathom deflation. I just see the Fed and Treasury flooding the market with dollars and I have to think that this will cause dollar based commodities to increase?
It has not been the case and I am underwater on most all of my industry picks.
That said, I think this is a good company, I do not own it, but if it continues to slide I will add it.
Make your vote count!
Do you agree that Occidental Petroleum 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.
More CAPS-lovin' Foolishness:
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