Join        Login             Stock Quote

Use These 5 "Below Book Value" Stocks To Play Defense

 July 22, 2011 03:52 PM

What will the U.S. economy look like in 12 months? The crystal ball, as they say, is hazy.

The odds seem balanced between a renewed recession and a long-awaited upturn. With such uncertainty, it's wise to focus on stocks with material protection on the downside. This way, if the economy and the market hit the skids, investors will be less likely to unload these stocks and will instead start to sell pricier equities.

You can find this downside protection on the balance sheet. Many companies have shares selling for less than the value of the assets on their balance sheet, or below tangible book value. These "below book" stocks tend to be safe harbors in any market storm.

Know your assets
To profit from this approach, you'll need to figure out whether the balance sheet figures represent real-world values. When I ran a screen of below-book names, a number of dry bulk shipping firms appeared right at the top. Yet as I noted last month, it's not clear what their ships would actually fetch in the re-sale market. So for today's purposes, I've eliminated all of those names from the screened results. I also noted a preponderance of big banks on the list. Many are limping along in a tough economy, waiting for business to pick up. Yet when that happens, shares could move up to 1.5 times book value, more than 50% above current levels, if history is any guide.

After excluding shippers, insurers and banks, what's left? Well, Audiovox (Nasdaq: VOXX), which I wrote about earlier this week, stands out as a deep value play.

Next Page >>123
iOnTheMarket Premium


Comments Closed

rss feed

Latest Stories

article imageEmerging-Markets Stocks Took The Lead Last Week

Emerging-markets equities enjoyed a solid rise last week among the major asset classes, based on a set of read on...

article imageDoes Your Latest Investment Pass This Test?

On Wednesday, I sounded the alarm about the problems looming for some consumer staples stocks. In short, read on...

article imageIs The Slump In US Manufacturing Easing?

Yesterday’s November survey data from the Philadelphia Fed hints at the possibility that a stronger trend read on...

article imageMarket Potentially Facing Near Term Technical Headwinds

After the S&P 500 Index pullback on Thursday and Friday last week, the market's advance on Monday and read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.