Yes, the stock market has been on an incredible upward
tear, but there has also been a lot of volatility and a lot
of stocks left behind. Are there any out there that are
outrageously cheap?
I
found onerecently, and I got to thinking about the others
out there when I read money manager Bill Miller's comment
that "the market abounds with good value." Of course, Miller
also wrote last August that
stocks were the cheapest they'd been since 1991... and
after a brief rebound, they went right on dropping (though
the recent recovery has been nice).
But Miller did jump the gun, and his fund suffered last
year due to core holdings in some deceptively cheap stocks
such as
Eastman Kodak (NYSE: EK) and
Electronic Arts (Nasdaq: ERTS).
However, there are some individual stocks today that, for
one reason or another, remain outrageously cheap.
Back up the truck, people
What makes for an outrageously cheap stock? Here's
my short list:
Now, there are only a handful of large caps or mid caps
that meet those criteria, so if you really want to build an
"outrageously cheap" portfolio, you may need to start
thinking of yourself as a small-cap investor.
Welcome to the jungle
In truth, large caps such as
AT&T (NYSE: T) attract far too much
investor attention to ever become inefficiently priced. That
$150 billion tech giant is tracked by 38 sell-side
analysts.
You generally won't find as much interest among small
caps, which is one of the reasons why -- given the criteria
above --
Abercrombie & Fitch (NYSE: ANF),
Chicago Bridge & Iron (NYSE: CBI), and
Corinthian Colleges (Nasdaq: COCO) look
outrageously cheap.
Company
EV/EBITDA
Net Cash on Hand
Investors Scared Because ...
Abercrombie
5.9
$343 million
Tied to consumer retail spending.
CB&I
4.1
$42 million
Backlog tied to investment in energy
infrastructure. Continued... |