100 Stocks That Offer Deep Value

The Manual of Ideas research team recently jumped into the proverbial stock market "bargain bin" to try to uncover some compelling values. Here is what we found:

Price Does Not Equal Value

Former Columbia professor Benjamin Graham once said, “Price is what you pay; value is what you get.” Many investors agree with this statement – though only outside the investment arena. Few of us would refuse to buy an item in a department store just because it is on sale, yet many do just that when it comes to the stock market. The fear associated with buying a depressed stock, obviously, is that the price decline signifies a fundamental problem. Yet even if the decline has been caused by a decline in intrinsic value, the question is whether the price has declined more than the value erosion warrants. Disciplined investors try to estimate the intrinsic value of companies within their circle of competence and buy them when the price drops far below estimated value.

Graham-Style Value Has Outperformed

Economists Eugene Fama and Ken French have extensively studied the relationship between stock performance and book-to-market ratios. Their seminal paper covered the period from 1963-1990 and included nearly all stocks on the NYSE, Amex and Nasdaq stock markets. The stocks were divided into ten groups (deciles) based on book-to-market and were re-ranked annually. The highest book-to-market stocks outperformed the lowest book-to-market stocks by 21% to 8%, on average, with each descending decile performing worse than the previous. Fama and French also examined the beta of each decile and found that value stocks had lower risk, while growth stocks had the highest risk. The study had a profound impact in part because Fama was a long-time champion of the capital asset pricing model.

Relative Annual Performance of Value versus Growth Stocks, 1928-2008

Source: The Manual of Ideas, Kenneth R. French.

What We Mean By Ben Graham-Style Value

Ben Graham’s favorite approach to valuation was to emphasize the values evident on a company’s balance sheet. Unlike values derived from income statement and cash flow analysis, balance sheet values were deemed “safer” because they depended less on the value of a business as a going concern. If Graham could buy companies for less than the carrying value of their current assets net of all liabilities, he reasoned that he was might be a good deal.

Top 100 Companies Passing Deep Value Screen

The Manual of ideas recently published the results of a screen for companies meeting Ben Graham's criteria of value. Several of the companies on the list have net cash positions that are meaningfully above their recent market value. These ultra-cheap companies include Trident Microsystems (TRID), PDI (PDII), Hurray! (HRAY), Actions Semiconductor (ACTS), Acorn International (ATV), Mattson Technology (MTSN), ACADIA Pharma (ACAD), Facet Biotech (FACT), Soapstone Networks (SOAP), and Dot Hill Systems (HILL).

The following are the Top 100 screen results, in alphabetical order:

		Price	MV	EV	Price/	Cash/
Company / Ticker	Industry	($)	($mn)	($mn)	T. Book	MV
A.C. Moore Arts / ACMR	Retail (Specialty Non-Apparel)	3.26	67	22	.4x	67%
ACADIA Pharma / ACAD	Biotechnology & Drugs	0.95	35	-24	.7x	167%
Acorn International / ATV	Appliances & Tools	3.25	93	-70	.5x	176%
Actions Semiconductor / ACTS	Semiconductors	1.75	151	-117	.5x	178%
Adaptec / ADPT	Computer Storage Devices	2.78	339	-31	.9x	109%
Anadigics / ANAD	Semiconductors	3.19	202	103	.9x	49%
Arctic Cat / ACAT	Recreational Products	3.90	71	74	.4x	-5%
Ascent Media / ASCMA	Broadcasting & Cable TV	24.99	352	10	.6x	97%
Audiovox / VOXX	Communications Equipment	5.15	118	119	.4x	-1%
AuthenTec / AUTH	Semiconductors	1.89	54	-9	.7x	117%
Avanex / AVNX	Communications Equipment	3.00	47	13	.7x	72%
Avigen / AVGN	Biotechnology & Drugs	1.21	36	-5	.8x	113%
Axcelis Technologies / ACLS	Semiconductors	0.50	52	97	.2x	-88%
BE Semiconductor / BESIY	Semiconductors	1.95	60	44	.5x	27%
Benchmark Electron. / BHE	Electronic Instruments & Contr.	11.85	773	378	.8x	51%
BioForm Medical / BFRM	Medical Equipment & Supplies	1.06	49	4	.7x	91%
Bookham / BKHM	Communications Equipment	0.60	61	16	.5x	73%
Cascade Microtech / CSCD	Scientific & Technical Instrum.	3.03	40	8	.5x	81%
CCA Industries / CAW	Personal & Household Products	3.07	22	9	.8x	57%
CE Franklin / CFK	Oil Well Services & Equipment	4.87	90	119	.9x	-33%
Clarus Corp. / CLRS	Misc. Financial Services	4.10	71	-15	.8x	121%
Communications Systems / JCS	Communications Equipment	7.90	65	39	.8x	41%
Comverse Technology / CMVT	Software & Programming	6.90	1,394	400	.7x	130%
Crocs / CROX	Footwear	2.29	190	161	.8x	15%
Cutera / CUTR	Medical Equipment & Supplies	6.30	84	-14	.8x	116%
Cynosure / CYNO	Medical Equipment & Supplies	6.21	79	5	.6x	93%
Dot Hill Systems / HILL	Computer Storage Devices	0.74	35	-21	.5x	162%
Electro Scientific / ESIO	Electronic Instruments & Contr.	8.25	224	65	.6x	71%
Facet Biotech / FACT	Biotechnology & Drugs	9.20	226	-145	.5x	164%
Flexsteel Industries / FLXS	Furniture & Fixtures	6.32	42	53	.4x	-28%
Footstar / FTAR	Retail (Apparel)	2.90	62	6	.6x	91%
Fuqi International / FUQI	Jewelry & Silverware	5.16	114	77	.9x	32%
Gencor Industries / GENC	Construction & Agricultural Ma.	7.55	73	20	.7x	72%
Gravity / GRVY	Software & Programming	1.00	28	-14	.6x	149%
GTSI / GTSI	Computer Hardware	4.16	42	73	.5x	-75%
Gushan Environmental / GU	Oil & Gas - Integrated	2.26	189	48	.6x	75%
Hardinge / HDNG	Misc. Capital Goods	4.91	57	66	.4x	-17%
Harvest Natural / HNR	Oil & Gas Operations	4.62	152	55	.6x	64%
Heelys / HLYS	Footwear	1.84	51	-18	.6x	135%
Himax Technologies / HIMX	Semiconductors	2.74	521	372	1.2x	29%
Horsehead / ZINC	Metal Mining	7.27	256	134	.9x	48%
Hudson Highland / HHGP	Business Services	1.81	46	2	.4x	96%
Hurray! / HRAY	Communications Services	1.50	33	-27	.5x	181%
Hutchison Telecom / HTX	Communications Services	4.80	1,541	2,628	2.3x	-71%
Ikanos Comms / IKAN	Communications Equipment	1.37	40	-19	.5x	149%
Imation / IMN	Computer Services	10.30	386	283	.7x	27%
Ingram Micro / IM	Computer Hardware	13.65	2,205	1,920	.8x	13%
Integrated Silicon / ISSI	Semiconductors	2.10	54	8	.5x	85%
Intellon / ITLN	Semiconductors	2.13	67	11	1.0x	83%
iPass / IPAS	Software & Programming	1.05	64	-4	.7x	106%
KHD Humboldt Wedag / KHD	Construction & Agricultural Ma.	8.81	269	-132	1.0x	149%
K-Swiss / KSWS	Footwear	9.70	338	136	1.1x	60%
L.S. Starrett / SCX	Misc. Capital Goods	9.76	65	63	.4x	3%
LeapFrog / LF	Recreational Products	1.89	121	42	.8x	66%
Linktone / LTON	Computer Services	1.56	66	-30	.6x	146%
LookSmart / LOOK	Computer Services	1.36	23	-8	.8x	134%
MarineMax / HZO	Retail (Specialty Non-Apparel)	3.96	73	388	.3x	-429%
Mattson Technology / MTSN	Semiconductors	1.24	62	-42	.4x	168%
MEMSIC / MEMS	Semiconductors	2.55	60	-6	.7x	109%
ModusLink Global / MLNK	Computer Services	3.88	177	42	.6x	76%
Movado Group / MOV	Jewelry & Silverware	8.80	215	193	.5x	10%
Nam Tai Electronics / NTE	Electronic Instruments & Contr.	3.93	176	-53	.6x	130%
Natuzzi / NTZ	Furniture & Fixtures	1.35	74	15	.1x	80%
Noah Education / NED	Schools	2.97	119	-31	.7x	126%
Northstar Neuroscience / NSTR	Medical Equipment & Supplies	1.93	51	-14	.8x	127%
Nu Horizons / NUHC	Electronic Instruments & Contr.	2.77	52	107	.4x	-108%
Opnext / OPXT	Semiconductors	2.16	197	42	.6x	79%
PC Connection / PCCC	Retail (Catalog & Mail Order)	4.75	128	86	.7x	33%
PDF Solutions / PDFS	Semiconductors	1.68	44	4	.8x	90%
PDI / PDII	Business Services	3.29	47	-44	.6x	193%
Pomeroy IT Solutions / PMRY	Computer Hardware	3.41	32	0	.4x	100%
QLT / QLTI	Biotechnology & Drugs	1.98	108	-57	.3x	153%
Rackable Systems / RACK	Computer Hardware	4.57	138	-34	.6x	125%
Rewards Network / DINE	Business Services	3.50	96	87	1.1x	9%
Richardson Electron / RELL	Electronic Instruments & Contr.	3.84	69	89	.6x	-29%
Rocky Brands / RCKY	Footwear	4.31	24	107	.5x	-351%
Rudolph Technologies / RTEC	Semiconductors	4.62	142	64	.9x	55%
Schuff International / SHFK	Construction Services	12.82	91	67	.6x	27%
Sierra Wireless / SWIR	Communications Equipment	5.52	171	90	.6x	47%
Skechers / SKX	Footwear	9.30	430	332	.6x	23%
SMART Modular / SMOD	Semiconductors	2.12	131	87	.6x	34%
Soapstone Networks / SOAP	Communications Equipment	3.68	55	-34	.6x	163%
Superior Uniform / SGC	Apparel/Accessories	7.00	42	41	.7x	2%
Syneron Medical / ELOS	Medical Equipment & Supplies	6.53	179	-10	.8x	106%
Tech Data / TECD	Computer Hardware	26.51	1,328	1,219	.8x	8%
The9 Limited / NCTY	Business Services	9.32	250	-75	.6x	130%
TheStreet.com / TSCM	Computer Services	2.42	74	2	.7x	98%
TomoTherapy / TOMO	Medical Equipment & Supplies	2.88	150	-5	.7x	103%
Trans World / TWMC	Business Services	0.61	19	2	.1x	92%
Trident Microsystems / TRID	Semiconductors	1.45	91	-121	.4x	233%
Tuesday Morning / TUES	Retail (Department & Discount)	2.55	110	106	.5x	3%
Ultra Clean Holdings / UCTT	Semiconductors	1.77	38	27	.5x	30%
Universal Stainless / USAP	Iron & Steel	12.08	81	68	.6x	16%
Volt Information / VOL	Business Services	7.85	164	154	.6x	6%
Voltaire / VOLT	Computer Hardware	2.44	51	-2	.9x	104%
Voyager Learning / VLCY	Printing & Publishing	1.83	55	-26	.9x	147%
West Marine / WMAR	Retail (Specialty Non-Apparel)	5.20	115	155	.6x	-34%
Xyratex / XRTX	Computer Storage Devices	3.34	98	65	.5x	34%
Zapata / ZAP	Misc. Financial Services	5.80	112	-43	.7x	138%
Zygo / ZIGO	Semiconductors	4.97	84	36	.6x	57%

Disclosure: Long GRVY and HNR. No positions in the other companies mentioned in this article.