4 Deep Value Stocks Worth a Second Look

Given the medium term risks for the stock market, I thought that I would highlight a few deep value stocks that may provide some downside protection from the cushion of fundamental value.

Stocks trading below net cash
I screened my database of US listed stocks for companies that trade below net cash (cash less all debt) and are showing positive earnings. The positive earnings test is a second check for the viability of the enterprise, as a deteriorating income statement could easily wipe out any value shown on a balance sheet. Not surprisingly, the pickings were rather slim given the market's extended nature:

Health Net Inc (HNT) and Pain Therapeutics Inc (PTIE)

Stocks trading below net net working capital

This is a classic Ben Graham screen. I looked for stocks trading below net-net working capital (current assets – all liabilities) and are showing positive earnings:

Cynosure Inc (CYNO) and Volt Information Sciences Inc (VOL)

I would not blindly buy these names but take this small list as a starting point for further analysis. I know nothing about the outlook or fundamentals of these companies. In particular, I would be cautious about Pain Therapeutics as it had shown a spate of insider selling.

Comments

[ari5000:]

HNT -- lousy management

PTIE -- this is a real lottery pick. Their earnings last year were a one-time thing. This stock's future depends on one drug -- trials are not due until next year. It's trading for cash value for a reason -- may never be profitable.

I've only done some minimal research but these names have crossed my path. Doing 'value screens' without much research is always dangerous because very often there are clear reasons why the stock is so cheap -- as opposed to undervalued. The other two I don't know much about.

Jul 27 08:43 AM

[emthree:]

Hi, may I ask what software you used for the fundamental screening ?
HNT, CYNO & VOL turned up on my technical momentum screens in August and they have all fared well since your July/27 article. I am interested in adding a some fundamental value criteria to my screening. The 2 value screens your describe here look interesting. I am using TC2007 from Worden Bros. I don't think it can do this screening.

Sep 09 11:16 AM

[Graham and ...:]

We've owned both (HNT) and (VOL) in the past At lower prices than the current ones.

Maybe that makes us VERY deep value investors.

Nov 03 12:30 PM