value stocks

 

One of my rules of thumb in equity investing is that if I buy companies trading below tangible book value,  with earnings yields over 10%, it is difficult to lose value, and the odds favor gaining value.

But there are some caveats:

  • Analyze the balance sheet, highly indebted companies are not to be trusted, but that varies by industry.
  • Longer dated assets, like property, plant & equipment should be discounted.
  • Banks and REITs must be scrutinized carefully, because of their weak liability structures.
  • Foreign companies need extra scrutiny, because the disclosures are often not as good.  This goes triple for Chinese companies.
  • Make sure you are not investing in a “buggy whip” industry, particularly in the era of the internet.  How can your company be disrupted?

The idea is a simple one.  Buy companies below their tangible book value when they have good earnings, and good earnings prospects. Over a long enough period of time, the growth in tangible book value will help drive growth in the stock price.

For companies with over $100 million in market capitalization, here are the companies that fit this description:

company ticker img_desc country exchg_desc P / TB P / E Expected P/E Mkt cap LT Debt/ Equity
AerCap Holdings N.V. AER 0939 – Rental & Leasing Netherlands N – New York

0.66

7.6

5.2

1524.4

263.6

Aircastle Limited AYR 0939 – Rental & Leasing United States N – New York

0.64

8.4

8.1

931.2

202.1

American International Group, AIG 0715 – Insurance (Property & Casualty) United States N – New York

0.55

2.9

9.8

56637

73.6

Anworth MortgageAsset Corpora ANH 0933 – Real Estate Operations United States N – New York

0.94

7.8

7.9

917.8

3.8

Assurant, Inc. AIZ 0709 – Insurance (Life) United States N – New York

0.74

5.7

6

2992.7

19.6

AXA (ADR) AXAHY 0709 – Insurance (Life) France O – Over the counter

0.88

7.6

5.8

29204.3

21.5

Axis Capital Holdings Limited AXS 0715 – Insurance(Property & Casualty) Bermuda N – New York

0.86

8.3

8.8

4325.9

19.3

AXT, Inc. AXTI 1033 – Semiconductors United States M – Nasdaq

0.94

7.5

9.9

129

2.8

Banco Bilbao Vizcaya Argentari BBVA 0724 – Money Center Banks Spain N – New York

0.9

8.7

6

34554.8

250.4

Barclays PLC (ADR) BCS 0727 – Regional Banks United Kingdom N – New York

0.42

6.9

3.6

31291.9

44.7

Callon Petroleum Company CPE 0609 – Oil & Gas Operations United States N – New York

0.86

1.7

5.8

171.6

62.6

Chimera Investment Corporation CIM 0703 – Consumer Financial Services United States N – New York

0.73

4.6

5.3

2434.6

59.2

China Gerui Adv Mtals Grp Ltd CHOP 0121 – Iron & Steel China M – Nasdaq

0.55

2.3

1.7

157.4

0

China Zenix Auto International ZX 0415 – Auto & Truck Parts China N – New York

0.49

1.8

1.4

127.3

0

Citigroup Inc. C 0724 – Money Center Banks United States N – New York

0.53

7.4

5.8

77291.7

165.3

Corning Incorporated GLW 1024 – Electronic Instruments & Controls United States N – New York

0.95

8

8.4

19410

14.7

Crexus Investment Corp CXS 0933 – Real Estate Operations United States N – New York

0.85

6.6

9.4

779.2

0

Deutsche Bank AG (USA) DB 0727 – Regional Banks Germany N – New York

0.65

7.6

4.7

31543.1

318.7

GeoEye Inc. GEOY 0909 – Business Services United States M – Nasdaq

0.8

7.3

8.7

358.5

97.6

Hardinge Inc. HDNG 0218 – Misc. Capital Goods United States M – Nasdaq

0.74

8

7.4

105.1

4.3

Homex Development Corp. (ADR) HXM 0215 – Construction Services Mexico N – New York

0.91

8.6

5.5

846.4

85.4

Ingles Markets, Incorporated IMKTA 0957 – Retail (Grocery) United States M – Nasdaq

0.91

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