Value investors look for great companies at great prices. The ideal company builds value and gives investors great returns on their investment.
Classic value investing -- which boils down to trying to buy $1 for $0.50 -- has a long history of success and has been advocated by luminaries such as Warren Buffett and his mentor, Benjamin Graham. You'd be reasonable to think, though, that finding such companies is easier said than done. It's a harder thing to do now than it used to be, partly because so many people now invest this way and also because it's so easy to get information on companies these days. It's hard to stumble upon companies others haven't already stumbled upon.
Take advantage
Still, not all is lost. There are more tools to let you scope out potential values than there used to be. For instance, I like to use the screening tool from our Motley Fool CAPS investor community to look for prospects. For instance, below you'll find a sample of top-rated five-star stocks that have nevertheless fallen in price over the past year, suggesting that they may be better values than ever.
|
Company |
1-Year Return |
|---|---|
|
Valero Energy |
(39%) |
|
Philip Morris International |
(3%) |
|
Procter & Gamble |
(16%) |
|
Petroleo Brasileiro |
(4%) |
|
Johnson & Johnson |
(10%) |
|
Corning |
(9%) |
|
Chesapeake Energy |
(32%) |
Data: Motley Fool CAPS.
Of course, that's not enough to go on, so you'd want to look at more information on each candidate -- both quantitative and qualitative. You can easily find more data online on important metrics like dividend yields, profit margins, valuation, and growth rates. Watch as these statistics give you a broader picture of these companies:
|
Company |
Dividend Yield |
Recent P/E Ratio |
5-Year |
Net Profit Margin |
5-Year |
|---|---|---|---|---|---|
|
Valero Energy |
3.0% |
NM |
NM |
(2%) |
15% |
|
Philip Morris International |
4.8% |
14.8 |
NA |
26% |
NA |
|
Procter & Gamble |
3.1% |
13.4 |
10-24 |
17% |
10% |
|
Petroleo Brasileiro |
0.7% |
10.5 |
3-20 |
16% |
31% |
|
Johnson & Johnson |
3.2% |
13.4 |
11-23 |
21% |
7% |
|
Corning |
1.3% |
14.8 |
NM |
33% |
9% |
|
Chesapeake Energy |
1.1% |
NM |
6-65 |
(22%) |
40% |
Data: Motley Fool CAPS.
NM = not meaningful due to negative earnings during period.
NA = not available due to spinoff from Altria Group within five-year period.
Of course, for maximum reliability, you should crunch some or many of these numbers on your own -- at least for the companies in which you're seriously considering investing -- because sometimes the canned data gets garbled.
Meanwhile, you can also find qualitative impressions on the companies in CAPS. For example, I came across these tidbits from members:
- Corning is the world leader in fiber optic cable, which will continue to be in demand for the foreseeable future. It supplies Sony, Samsung, and Sharp and makes "precision glass" for LCD monitors and more.
- Chesapeake Energy should profit from price increases, and from hedging contracts it has in place. But there are concerns about the CEO's compensation and commitment to shareholders, as well as the steep compensation of the board of directors.
- Philip Morris International can profit from a weak dollar, and it has a lot of cash with which to fuel growth. It is also looking to generate substantial sales in China.
So as you go about your investing, keep an eye out for companies that earn a lot of respect from investors, and that seem to be priced attractively. Among them you'll find some real long-term winners.
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