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In Part One, I presented a method for using historical low price to book valuation ratios to find very good long term entry points (Long Term Investing Using Historical Low Price to Book Valuations). The two companies presented at that time were Goldman Sachs (GS) and Berkshire Hathaway (BRK.A and BRK.B). Both have been performing quite well. Goldman Sachs was identified at a break out level in the $126 to $128 area, and it now trades above $144. Berkshire Hathaway was identified at a break out level in the $86 to $88 level, and now it trades above $95.

Two other companies appear to have very nice entry levels based on this method, and they are presented below.

The first company is Archer-Daniels-Midland (ADM).

Archer-Daniels-Midland has steadily increased its tangible book value per share over the last twenty years. It has only had a small decrease of 5% in 1998 and 5% in 1999.

They have nice record of increasing its tangible book value per share year in and year out. See the graph below that illustrates this.

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Figure 1: ADM Tangible Book Value Per Share

Next, we'll look at the upper and lower valuation trend lines based on historical tangible book value per share.

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Figure 2: ADM Historical Price with Upper and Lower Valuation Trend Lines

The lower valuation trend line is set to be just below 1 times tangible book value. This would set a lower valuation for ADM of approximately $27 per share. With the stock trading at $28.64, this gives downside of only 5.7% with a tremendous amount of upside based on historical valuations.

The chart for ADM currently points to a very good entry level as well. ADM recently held long term support at the $24 level. Short term, it may have a gap to close at $27.50 with the 50 day moving average currently at $27, so one may want wait for a short term pullback to one of these levels before committing.

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Figure 3: ADM Four Year Price Chart

The second company is Apache (APA).

Apache Corp. has steadily increased its tangible book value per share over the last twenty years. It has only had a small decrease of 6% in 1998 and 5% in 2009. See the graph below that illustrates this.

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Figure 4: APA Tangible Book Value Per Share

Next, we'll look at the upper and lower valuation trend lines based on historical tangible book value per share.

(click to enlarge)

Figure 5: APA Historical Price with Upper and Lower Valuation Trend Lines

The lower valuation trend line is set to be approximately 1.2 times tangible book value. This would set a lower valuation for APA of approximately $89 per share. With the stock trading at the $82 level, it is currently still trading below its historical lower valuation.

Now let's look at the charts. APA seems to have recently held long term support at the $75 level. It has now broken above its 50 day level of $78 and may have a gap to close at the $78.50 level. If there were to be a pullback to these levels, that would be a great entry level.

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Figure 6: APA Two Year Price Chart

Both of these great companies seem to be presenting great long term entry levels for patient long term investors.

Source: Long-Term Investing Using Historical Low Price-To-Book Valuations: Part 2