Is it possible to find value at a time when the NASDAQ-100
The answer is maybe — especially if you skip the current big name tech stock mania and instead focus on what Benjamin Graham liked to think of as “cheap.” The Columbia University business professor wrote the book on the subject.
Here are 4 stocks that fit the basic criteria. It’s likely that large institutional investors who screen for old school value are finding these on the list these days. No buy recommendation is made, only a heads up about the intriguing metrics.
The stock is available for purchase at a 13% discount from its book value. The price/earnings ratio of 12 is about half that current Schiller p/e for the S&P 500. Earnings were great last year and the 5-year record is positive — although AAR analysts expect negative earnings just ahead. Meantime, shareholder equity greatly exceeds long-term debt and a 1.29% dividend is being paid.
Their price/earnings ratio is 7 and the stock trades at just 72% of book. Like many companies right now the earnings outlook for the coming months is negative — but last year’s record was quite good and earnings are green on the 5-year time frame. Shareholder equity is greater than long-term debt and the current ratio is 2.7. Carpenter pays a 3.3% dividend.
Pohang Iron & Steel (Posco) is NYSE-listed, based in South Korea and, as the name indicates, involved in the metals industry.
The company trades at a 66% discount to its book value. The price/earnings ratio is 10. The earnings were good last year and the 5-year record is quite good. Long-term debt is less than shareholder equity. The current ratio is 2.1.
Posco is paying investors a 5% dividend. The average daily volume of 285,000 shares is light for a New York Stock Exchange stock. Earlier this year, Goldman and Nomura analysts upgraded their ratings from “neutral” to “buy.”
Sandy Spring Bancorp is NASDAQ-traded and headquartered in Olney, Maryland.
The bank is trading at just 78% of book with a price/earnings ratio of 9.3. Earnings were good last year and they’ve been good for the past 5 years as well. Sandy Spring’s shareholder equity exceeds long-term debt. The dividend payment comes to 4.8% annually. The stock is relatively lightly traded with an average daily volume of just 265,000 shares.
This classic value technique for identifying a certain type of stock does not guarantee success, long-term or short-term. Sudden shocks that cause investors to dump everything at once can take place at anytime. All you have here is the knowledge that you’ve found what looks like value while others might be chasing mere expectation.
Typically stocks trading below their book value have some kind of issue whether it’s the sector they’re in or something specific about their brand or management. For whatever reason, expectations are low. It’s advisable to conduct extensive further research.
To read my take on Professor Graham’s book The Intelligent Investor, please have a look at Identifying Value Stocks Is Methodology And Art.
Stats courtesy of FinViz.com.
I do not hold positions in these investments. No recommendations are made one way or the other. If you’re an investor, you’d want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment advisor.