Seeking Alpha
Follows Benjamin Graham method, deep value, value, long only
Profile| Send Message|
( followers)  

Summary

  • AAPL, BGS, CF, and FCX are all undervalued according to the ModernGraham valuation model based on Benjamin Graham's value investing formulas.
  • CF Industries is suitable for both Defensive Investors and Enterprising Investors following the ModernGraham approach.
  • AAPL, BGS, and FCX are suitable only for Enterprising Investors.

ModernGraham currently covers over 300 companies in its Valuation Index, analyzing each in detail to determine whether they fit a modernized version of Benjamin Graham's conservative metrics from his classic The Intelligent Investor.

The site then proceeds to give each company a rating as suitable for Defensive Investors, those unwilling to conduct substantial research, Enterprising Investors, those happy to spend the time researching, or Speculators.

Each company is further analyzed using one of Graham's valuation formulas to determine whether it is undervalued, fairly valued, or overvalued by Mr. Market today.

The following four companies were found this week to be suitable for either Defensive Investors or Enterprising Investors (or both) and undervalued:

  • Apple Inc. (NASDAQ:AAPL) - Apple is a very strong company for Enterprising Investors to explore, but the Defensive Investor has concerns with the low current ratio, lack of a long enough dividend record, and the high PB ratio. The company passes all of the Enterprising Investor's requirements. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities. From a valuation side of things, the company appears significantly undervalued after growing its EPSmg (normalized earnings) from $1.32 in 2010 to an estimated $5.47 for 2014. This strong level of demonstrated growth outpaces the market's implied estimate of 4.32% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham's formula, to return an estimate of intrinsic value well above the market price. (See the full valuation)
  • AAPL Chart

    AAPL data by YCharts

  • B&G Foods Inc. (NYSE:BGS) - B&G Foods is intriguing to Enterprising Investors but does not qualify for the Defensive Investor. The Defensive Investor has some major concerns and in fact the only requirements of the investor type which the company passes are the earnings stability and earnings growth. The Enterprising Investor, on the other hand, only has an issue with the level of debt relative to the net current assets. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities. As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.49 in 2010 to an estimated $1.22 for 2014. This strong level of demonstrated growth outpaces the market's implied estimate of 9.57% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham's formula, to return an estimate of intrinsic value exceeding the market price. (See the full valuation)
  • BGS Chart

    BGS data by YCharts

  • CF Industries (NYSE:CF) - CF Industries is a very intriguing company for both Defensive Investors and Enterprising Investors. The Defensive Investor's only concern is the lack of earnings stability over the last ten years, while the Enterprising Investor's only issue is with the level of debt relative to the net current assets. As a result, value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities. Looking at the company from a valuation angle shows the company to be significantly undervalued after growing its EPSmg (normalized earnings) from $7.11 in 2010 to an estimated $21.47 for 2014. This strong level of demonstrated growth greatly exceeds the market's implied estimate of 1.23% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value well above the price. (See the full valuation)
  • CF Chart

    CF data by YCharts

  • Freeport-McMoRan Copper & Gold (NYSE:FCX) - Freeport-McMoRan satisfies the Enterprising Investor but not the Defensive Investor. The Defensive Investor has concerns with the low current ratio, as well as the lack of earnings stability over the last ten years and the lack of stable dividend payments over that time frame. The Enterprising Investor's only concern is with the high level of debt relative to the net current assets. As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities. From a valuation side of things, the company appears to be significantly undervalued after growing its EPSmg (normalized earnings) from $0.01 in 2010 to an estimated $2.95 for 2014. This level of demonstrated growth more than supports the market's implied estimate of 1.43% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value above the price. (See the full valuation)

FCX Chart

FCX data by YCharts

Source: 4 Elite Companies In The Spotlight This Week