Those who follow my work know that I spend way too much time running screens on the weekends.  My goal is to find new ideas.  I run various types of screens, looking across broad market capitalization ranges or within sectors or even narrow industries.  Many of the screens are value-focused, others pursue growth.  I tweak my screens, and I try to come up with new ones.  The screen I ran today extends upon some screening I was doing at the end of last year within the Consumer Discretionary sector, which was laden with companies trading below tangible book value.

Today, I applied several of those parameters to the broad market and tried to hone in on companies that not only have strong balance sheets but that appear to have weathered the storm.  While the 8 names I am about to share are up a lot this year, they were down a lot last year and appear to be cheap yet.  Lots of people like to buy value stocks when they are beaten down, but prices 50% higher aren't necessarily bad prices.  In the case of this group, they fell pretty much with the market last year, about 47% on average.  While they have rallied 57% on average in 2009, they are still down over the past 21 months.  While I know only one of these companies very closely, the group certainly appears to be worth investigating.

In order to narrow the universe, this is what I did (and why):

• Market cap:  $100mm to $2bln (my definition of small-cap)
• YTD Price Return > 0 (eliminate poorly performing stocks)
• Book Value <1 and TBV < 1.2  (potential downside protection)
• Forward PE < 25 (profitable and not excessively valued)
• Net Debt <0 (downside protection)
• ROE (Trailing 4Q) > 0 (weathered the storm)

Here are the results:

The list is sorted by economic sector, with 6 of the 10 sectors represented.  Before sharing some brief thoughts on each one, I wanted to share some general observations.  First, while the PE ratios are somewhat elevated vs. the market and relative to their 5-year medians, I believe that the explanation is depressed margins.  Note that the P/S ratios are all at a discount to their 5-year medians.  Second, I included a measure of BV relative to the 10-year median P/B ratio to see if any of these "always" trade below book value.  As you can see, each of the 8 stocks is trading below its long-term median, with most trading substantially lower.