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Usually when stocks get too cheap, Mr. Market quickly recognizes the errors of his ways and their price inefficiencies are eliminated. However, on more obscure stocks, Mr. Market is slower to catch on, providing opportunistic situations to exploit. This is exacerbated when management is coy about unlocked treasures (such as prime real estate) through poor communication with the investment community. The following three companies all sell near or below tangible book value and are essentially debt free, net of cash. Two of the companies hold vast real estate in support of their operations.

Luby's (NYSE:LUB): The company operates 93 Luby's cafeterias, 64 Fuddruckers, and 18 food service contracts. Luby's also has an additional 124 Fuddruckers franchisees. The company owns the land and structures on 97 of these locations. The stock is trading at a 3% discount to book value and a forward P/E of 20 times 2013 earnings estimates of 30 cents. The real estate is on the books at cost, and the company has benefited from land ownership for many years, so there is ample hidden value in the real estate that is not reflected in the computation of book value. Luby's generated $25 million worth of positive cash flow in 2012 and plowed all but $5 million back into the company via new store development and capital improvements.

Management has failed to return anything back to shareholders, as the shares languish near 25 year lows. It would be nice to see management consider a stock buyback plan, but this call has gone onto deaf ears, as they will not even take shareholder phone calls. The company utilizes an outside investment relations firm for all shareholder communication-not good. The fact that the company's CEO owns 15% of the stock is a good thing, because already being at retirement age, there is a good chance that he will want to monetize his investment by putting the company up for sale.

Fuel System Solutions (NASDAQ:FSYS): The CEO also owns about 15%, but this company has a cash hoard of almost $66 million and no debt, is selling at 20% discount to book, and 20 times 2013 earnings estimates of 67 cents. This is after the company came out with third quarter results that missed expectations and was hit by some very heavy "hate selling" that was way overdone. The shares are extremely oversold and its lowest target price of $14 has already been breached, so pessimism is running rampant (an opportune buying window).

The analysts at Piper Jaffray just upgraded the shares by placing a $24 price target, and some big players apparently agree with Piper's optimism, as Fisher Asset Management now owns 6%, while hedge fund manager Kevin Douglas has amassed a 5% stake.

The last time the shares reached these very oversold levels was in March of 2009, when the stock promptly ran up five fold, just six months later. Today, FSYS is a much stronger company then it was in March of 2009, yet the market continues to show it just as much disdain. This is another company that has poor communication with the shareholders as well as the "street". Management should either put the company up for sale or announce a stock buyback to take advantage of the current bargain share price - after all, FSYS raised $60 million in a secondary offering a few years ago by selling 2 million shares for $30 each. Would it not make perfect sense to buy those same shares back today at half price?

Farmer Brothers (NASDAQ:FARM): The company has just produced their first positive earnings in more than five years with the help of some real estate gains (they own the property on 64 of their 117 locations). FARM reported first quarter earnings of 19 cents on sales of $119 million. At first, Wall Street rewarded the shares with a bountiful markup of nearly 20%. Roth Capital Partners piled on by upping its price target a whopping 27% from $11 to $14, unfortunately good old fashioned profit taking decided to rear its ugly head and eroded all those gains and then some.

If not for the special onetime gains of $5 million, the coffee producer would have actually lost $1.5 million in the first quarter. The good news: its "EBITDA" or cash flow, nearly tripled from $4.7 million to $12.1 million, due to a 400 basis point improvement in gross profit margin (from 33% to 37%). The bad news: operating expenses went the wrong way, rising from 37% to 39%, but this added expense was due to increased payroll associated with investment in additional marketing and sales personnel. There is a possibility that this investment is starting to reap dividends, as chatter on the street alludes to new contracts inked with McDonald's (NYSE:MCD), Walgreen's (NYSE:WAG) and Food Lion. The company might even shed some light on this possible new commerce, at the annual shareholder meeting, set for December 4th or at the Wedbush California Dreamin Investment Conference scheduled for December 12th.

Bottom line: The upside reward on all three of these equities is roughly two times their potential risk, resulting in a compelling wager. They all have pristine balance sheets and sell at a discount to shareholder's equity. The fact that each of the companies are also bonafide takeover candidates is simply icing on the cake. Buy them and forget them - you will be pleasantly surprised.

Source: 3 Stocks Too Cheap To Pass Up