4 Extreme Value Stocks for Your Portfolio
Choose your own metrics and run these stocks through your own diligence process. You will find that these stocks tick most of the boxes for undervaluation. This is one of the most stringent screens I run, with the following filters
- P/E below 10
- P/B below 1
- Cash/Price > 1
- 52 week price performance = bottom 20% of its industry
All these stocks sport a negative enterprise value.
Whether these stocks deserve your investment dollars or not depends on your review of these individual businesses, finding out why the stock is valued so low and determining the potential of quick value realization (which you can only do if you dig through the business fundamentals, including historical financial statements and management discussions).
Key Valuation Indicators as of Oct 8, 2012
|Stock||Company||Market Value ($m)||P/E (ttm)||P/B||Cash ($m)||Debt ($m)||Dividend Yield||52 wk price performance|
Parke Bancorp (PKBK): A holding company for Parke Bank that provides banking services to individuals and small businesses in parts of New Jersey and Philadelphia, PA. The company trades at a -$41.40 m enterprise value and below net cash. The company has grown its book value in the last 3.5 years and has been profitable. The stock also sports an attractive PEG ratio of 0.5, which may or may not be relevant depending on how much stock you put in future earnings estimates (I don’t put too much).
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Universal Insurance (UVE): A Florida based Property and Casualty insurer, the company can be bought in the market today at –239m enterprise value. If profitable operations and continuous book value growth were not enough, the stock also pays a dividend that currently yields 8.2%. Is the dividend sustainable? Look at the cash on the books and judge for yourself.
Update: Since this list was posted, we have bought and sold UVE for 73.14% total return in about 6 months
Maxygen (MAXY): Maxygen is a bio-pharmaceutical company out of San Mateo California working to help alleviate the effects of chemotherapy and acute radiation syndrome. While a small bio-tech company can be risky, it is worth noting that the company has 2.5x its market value as cash on the books, and has no debt. The earnings have been erratic in the past, so the value lies entirely in its cash hoard and an expectation that the cash will not be frittered away. Enterprise value is a nice -109m
Knight Capital (KCG): Most of us are probably aware of Knight Capital and its big High Frequency Trading boo-boo few months ago. Given that, it may be wise to take the ttm earnings with a pinch of salt and assume. Still, with the stock 80% down in the last 52 weeks, there is enough value for the investor looking for blood in the streets. The valuation goes like this: $7.5 B in cash, $5.2 B in debt and half a billion in market value. Enterprise value = –2.07B. Do you think the company will survive and be profitable again?