) – Cisco is a Magic Formula name which recently lost 20% of its value due to a soft quarterly earnings report. A price to forward earnings ratio of 10X along with an EV/EBITDA of 8 make CSCO a stock to watch for 2011.
) – Intel is another favorite of mine at 9X earnings and an EV/EBITDA of under 5X – Wall Street is constantly obsessed with “newness” of a particular business, and this obsession of hot money with speculative investments have left INTC shares undervalued in the current environment relative to the company’s growth rate and free cash flows.
) – Best Buy is not as cheap as Hastings, but the company does trade for just 9X earnings and sports and EV/EBITDA ratio of under 5X – typically, I would prefer a discount to book value in a stock like this, which is thought to be a Buggy Whip maker by most “growth” investors and Wall Street pundits.
) – Ingram Micro is too cheap to ignore at 8X forward earnings and a small premium to tangible book value. Covered calls are an interesting option here, and the company appears to benefiting from the technology cycle that has lifted shares of companies in the cloud to 200 plus PE ratios.
) – Mosaic is one of the last stand alone pure plays on peak phosphate, so I like the name even though it looks fairly valued on traditional metrics such as earnings and cash flows. If the world runs out of fertilizer, MOS could be one of the best safe haven stocks for 2011.
) – Humana trades for around 8X earnings and has a virtual monopoly in healthcare. The new healthcare legislation has hurt the share price in the short run, but the fact is that Americans will be forced to do business with Humana with Obamacare.
) – Telefonica at 7.5X earnings and 9.4X earnings looks cheap and is held by Thornburg’s Bill Fries in their International fund. TEF is cheap on cash flows and carries a 6% yield. Investors should read Thornburg’s research on the name, as they believe growth in broadband in the developing markets should help TEF earnings going forward.
) – Total is another cheap foreign stock paying solid dividends. I believe the recent dip in Oil is a buying opportunity and that TOT is significantly undervalued.
) – Vaalco Energy is an American based company which operates oil wells in West Africa. The company is cheap on cash flows and is a member of the Magic Formula Screen, so look to sell puts or covered calls on the stock for a play on higher oil prices and a lower U.S. Dollar.
) – Freeport is dirt cheap on reserves with its 4 Billion pounds of Copper and Gold reserves, which alone are worth more than FCX’s entire market cap. At 8X earnings, the company appears to have a significant margin of safety on earnings as well as assets.
) – Sprint is now the low cost leader in cell phone service and should take market share in the increasingly commoditized phone service industry.
) – Coinstar is up nearly 10% today on the news that the company is offering streaming, although streaming seems to be an over-hyped “story” right now on Wall Street. At a 6-7X EV/EBITDA CSTR is pretty cheap given historical growth rates. For occasional movie renters, CSTR provides a much better “no strings” type of service than rival Netflix (NASDAQ:NFLX
) and is around 300% cheaper on cash flows.
) – Mister Softy has perked my interest with the recent fall in share price and trades for around 9X ex cash earnings for 2011. Whitney Tilson is very bullish on the name, and the company’s option premiums are wide enough that covered writing or call spread buying here makes sense.
In all, this is by no means a cheap stock market, but as a great trader once said “It’s a market of stocks, not a stock market.” These 23 stocks look to be good values despite the melt-up federally sponsored speculative rally that is going on in small cap indices and in “new” tech. The deficit situation is so insane that investors should look to hold hard assets such as farmland, bullion and silver as a Washington corruption and currency debasement hedge for the longer term. Those who blame speculators for rising commodity prices and not government largesse are not getting a clear view of the big picture. The off balance sheet liabilities are nearly large enough to bring down our economy already, yet we continue to spend more borrowed money than any government in the history of the World.
Disclosure: I am long AWX, VOXX, CSTR, S, NWLI, HAST, CSCO, MSFT, INTC, AHL, FCX, CSTR, TOT, TEF, MOS, JASO, EXM, GNK.
Additional disclosure: I am long BBY, short MDY