Valuation is an imperfect science, but it's as important a concept to fantasy football players as it is to investors. I should know; Eagles tight end Brent Celek was a waiver-wire pickup for me at the beginning of the season. His four catches for 61 yards and a touchdown against the Giants on Sunday helped deliver my fantasy team a victory.
Value is value, whether you're assembling a fantasy team or a stock portfolio. But don't take my word for it. "Before you make any decision -- who to draft, trade, start, and sit -- make sure you are following that basic principle; how risky is this move, does it give me the best chance to win?" writes ESPN fantasy analyst Matthew Berry in his annual manifesto.
See the parallels here? Winning fantasy players pick unloved players for less than market value, and market-beating investors buy oversold stocks for $0.50 on the dollar.
Waiver-wire heroes, unloved stocks ready to rise
These bargain hunters knew that, last winter, Amazon.com
More bargains are out there. For this weekly column, let's use the Motley Fool CAPS screener to find the stock market's version of underrated heroes like Celek. Here's what we're looking for:
- A minimum $250 million market cap, because we don't draft unsigned free agents.
- A price-to-earnings (P/E) ratio of less than 12, because we're not interested in players whom everyone else loves.
- A 10% or better return on equity (ROE), because we want proof that this stock can play at the level we need it to.
- A 10% or worse haircut in price over the past year, because we're bargain hunters. (This is a change to account for the market's massive run-up in the wake of the Wall Street Panic of 2008.)
Today's screen returned 58 candidates that could be worthy of filling roster spots in your portfolio. I've decided to highlight the six below:
|
Company |
52-Week Price Change |
P/E Ratio |
ROE |
|---|---|---|---|
|
Cubist Pharmaceuticals |
(33.4%) |
6.1 |
41% |
|
Amgen |
(11.5%) |
11.6 |
21.7% |
|
OSI Pharmaceuticals |
(20.3%) |
5.1 |
15.6% |
|
American Oriental Bioengineering |
(34%) |
6.7 |
12.4% |
|
China Security & Surveillance |
(36%) |
6.9 |
10.7% |
|
Nash-Finch Company |
(27.8%) |
9.9 |
10.3% |
Source: Motley Fool CAPS screen data.
Of these, I'd pick up China Security & Surveillance, a supplier of -- surprise! -- security and surveillance equipment throughout mainland China. Third-quarter earnings and revenue missed estimates, yes, but the stock trades for less than five times next year's projected earnings.
I'll understand if "projected" makes you queasy; it should. Projections are rarely reliable. But I like the evidence here of improving cash flow at China Security & Surveillance, thanks in part to big new deals.
"With restructured debt, upcoming large E-City projects and GAAP-only reporting, [China Security & Surveillance] has probably turned into solid company while still maintaining its growth and strong fundamentals," wrote CAPS All-Star sisula last month. "Market just can't ignore this company forever. The price doesn't reflect the prospects."
And I'm adding China Security & Surveillance to my CAPS portfolio. But that's just my take. What do you think? Would you give this stock a spot on your portfolio roster? Let us know by signing up for CAPS today. It's 100% free to participate.
