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 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 130,000 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.

Source: Capital IQ, a division of Standard & Poor's, Yahoo! Finance, and CAPS as of May 14.

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
The bottom line is that, on the whole, CAPS members have no interest in U.S. homebuilders. Nada. "Green shoots" or not, the tide doesn't seem to be shifting quickly, either. In fact, there's probably a better chance of Metallica recasting itself as a smooth jazz band than Toll Brothers climbing to four- or five-star status any time soon.

In another unloved sector, Annaly Capital Management may not be levered up as much as Goldman Sachs (NYSE:GS) or a premeltdown Lehman Brothers, but it has a similar strategy. That is, the company cranks out small returns on its assets but is able to parlay that into big returns for shareholders through an ample amount of debt. While the company's results don't suggest that it's on the verge of collapse, the stock's two-star rating suggests that CAPS members are still steering clear.

What's wrong with eBay? Not a whole lot, according to CAPS members, but the stock's three-star status makes it only a middling pick in the community's eyes. Competition is on the minds of many of the eBay bears as they watch competitors like craigslist.org and Amazon.com (NASDAQ:AMZN) encroach on eBay's core business.

A five-star is born!
Sin is in -- well, at least if it can help protect your portfolio. Just the thought of cigarettes may make a lot of people bristle, but that's what keeps the register ringing at Reynolds American. The company owns the Camel, Kool, and Winston cigarette brands -- among others -- and also lays claim to the Grizzly and Kodiak snuff labels.

Consumers may cut back on a lot during a recession, but tobacco is likely to be low on the list. And that 8.4% dividend is nothing to sneeze at, either!

But Reynolds American's four-star rating couldn't lift it over this week's top value stock -- Weatherford International. Though hardly a household name, Weatherford is an important player in the oil and gas market since it produces equipment and provides essential services that help exploration companies access and extract the fuels that they find.

CAPS All-Star daharkleroad is one of the nearly 750 Weatherford bulls on CAPS and gave the stock a thumbs-up earlier this year, saying:

The company has been beaten down by the market and the price to earnings ratio is vary good. Management has picked up a big piece of the action, indicating they believe things will improve. Overall world demand for oil is increasing.

Make your vote count!
Do you agree that Weatherford 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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