5 Bargain Value Investing Stocks With Cash Rich Balance Sheets

Cash and cash equivalents  are the easiest balance sheet line items to value. Typically they can be valued at 100 cents on a dollar. The holy grail of value investing is of course, finding stocks that carry more cash on their books than the entire company is worth in the stock market. And if the company has very little to no debt, so much the better.

The following 5 stocks have been picked as they have more cash on their balance sheets than their market value. Additionally, these companies have relatively little debt. Why would the market let the stock price go under the cash value? In most cases these companies have been running up losses on their P&L, so there is always a worry that they will eat into their cash and the value to the investor may not be realized. On the other hand, there is also the possibility that a savvy investor can figure out that these companies can be bought in their entirety for their cash and other liquid tangible assets and liquidated for profit. Use these ideas for further diligence to determine if these make for good value stocks to buy.

All prices and market values are as of market close on Mar 12, 2012.

1. Cowen Group Inc (COWN): Cowen Group, Inc. is a publicly owned asset management holding company. Through its subsidiaries, the firm provides alternative investment management, investment banking, research, and sales and trading services for its clients. It manages separate client focused portfolio through its subsidiaries. As with most financial firms, there may be a lot that goes into the Cash line item so it does require a deeper look.

  • Market Value: $304 M
  • Price: $2.67
  • Cash: $1.13 B
  • Debt: $146 M
  • P/B ratio: 0.53

2. FormFactor Inc (FORM): FormFactor, Inc. designs, develops, manufactures, sells, and supports semiconductor wafer probe card products and solutions worldwide. Its wafer probe card is used as an interface to connect electrically with and test individual chips on a wafer

  • Market Value: $256 M
  • Price: $5.16
  • Cash: $297 M
  • Debt: 0
  • P/B ratio: 0.73

3. Ditech Networks (DITC): Ditech Networks, Inc. designs, develops, and markets telecommunications equipment for use in wireline, wireless, satellite, and Internet protocol telecommunications networks worldwide. It offers voice quality enhancement solutions that enable service providers to deliver end-to-end communications to their subscribers, as well as voice applications solutions.

  • Market Value: $23.66 M
  • Price: $0.9111
  • Cash: $24.51 M
  • Debt: 0
  • P/B ratio: 0.71

4. Maxygen Inc (MAXY): Maxygen, Inc., a biopharmaceutical company, focuses on developing improved versions of protein drugs in North America and Europe. The company utilizes its MolecularBreeding directed evolution technology platform, along with ancillary technologies, and protein modification expertise to pursue the creation of biosuperior proteins. It engages in the discovery, research, and development of MAXY-G34 product candidates for the treatment of chemotherapy-induced neutropenia

  • Market Value: $156 M
  • Price: $5.56
  • Cash: $162 M
  • Debt: 0
  • P/B ratio: 0.94

5. The Street Inc (TST): TheStreet, Inc., together with its subsidiaries, operates as a digital financial media company in the United States. The company provides various subscription-based and advertising-supported content through a network of proprietary electronic services, including Web sites, mobile devices, email services, widgets, blogs, social media, podcasts, and online video channels.

  • Market Value: $61 M
  • Price: $1.88
  • Cash: $66 M
  • Debt: 0
  • P/B ratio: 0.65

How do you know if any of these stocks are great values? This type of valuation typically has a reason. Sometimes it is the profitability or lack of, sometimes there may be litigation risk. In some cases, such as biotech companies, the company may be well funded but the product may still be unproven. In any case, it makes sense to research these stocks to find out what the risk is and determine if the risk is large enough to warrant this level of undervaluation.

Leave a Reply

Your email address will not be published. Required fields are marked *