10 Mid Caps With Very Low Price/Book Values, Offering Substantial Arbitrage Potential

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 |  Includes: AIZ, CSC, ETFC, KEY, LM, LNC, MU, NRG, SUNEQ, XL
by: Follow My Alpha

People often say one man’s trash is another man’s treasure. If that’s how the phrase goes then market participants have definitely been taking out a lot of “trash” over the course of this last month. Still, one investor's trash often becomes another investor's treasure when market volatility goes through the roof. After such a rough month we thought it makes sense to go through the garbage to see if any treasure can be found.

We ran a screen for companies that were trading for no greater than price/book value (X=1) and no less than half of price/book value (X>.5). From this pool we screened for Mid-Cap companies ($1B-$10B in market value). In our view it seems that when ever there is substantial amount of volatility (like right now) mid cap stocks often get overlooked so that’s why we decided to specifically screen for this group. We did not screen out any sectors for this list.

The list below is sorted from lowest to highest by Price/Book value.

1.
MEMC Electronic Materials Inc (NYSE: WFR)

Sector

Technology

Industry

Semiconductor-Integrated Circuits

Market Cap

$1.28B

Beta

1.38

Analyst Sentiment

12/24 - List Neutral/Hold (Hold)

Click to enlarge

The firm produces and sells wafers for the semiconductor space worldwide. The firm’s price/book value is .54. WFR is currently offering an 85% potential return, in the form of arbitrage, should it return to full book value. In the last month WFR has lost 32.11% in value.

Short Interest Note:
The short interest for the firm is 7.3% as of 07/15/2011.

2. Lincoln National Corporation Co (NYSE: LNC)

Sector

Financial

Industry

Life Insurance

Market Cap

$7.33B

Beta

2.77

Analyst Sentiment

11/20 - List Buy/Outperform (Bullish)

Click to enlarge

The firm operates multiple investment management and insurance businesses along with broadcasting businesses via subsidiary companies. The firm’s price/book value is 57. LNC is currently offering a 75% potential return, in the form of arbitrage, should it return to full book value. In the last month LNC has lost 18.41% in value.

Short Interest Note:
The short interest for the firm is 3.4% as of 07/15/2011.

3. XL Group plc (NYSE: XL)

Sector

Financial

Industry

Property & Casualty Insurance

Market Cap

$6.2B

Beta

2.53

Analyst Sentiment

11/20 - List Buy/Outperform (Bullish)

Click to enlarge

The firm sells financial products to commercial, professional service, and industrial firms. As well, it operates in the reinsurance industry. The firm’s price/book value is .6. XL is currently offering a 66% potential return, in the form of arbitrage, should it return to full book value. In the last month XL has lost 10.37% in value.

Short Interest Note:
The short interest for the firm is 4.7% as of 07/15/2011.

4. Micron Technology, Inc. (Nasdaq: MU)

Sector

Technology

Industry

Semiconductor-Memory Chips

Market Cap

$6.3B

Beta

0.95

Analyst Sentiment

16/32 - List Buy/Outperform (Bullish)

Click to enlarge

The firm primarily manufactures NAND and DRAM flash memory along CMOS image sensors. The firm’s price/book value is .63. In the last month MU has lost 16.53% in value. The firm’s price/book value is .6. XL is currently offering a 66% potential return, in the form of arbitrage, should it return to full book value. In the last month MU has lost 16.53% in value.

Short Interest Note:
The short interest for the firm is
6.60% as of 07/15/2011.

5. Assurant, Inc. (NYSE: AIZ)

Sector

Financial

Industry

Accident & Health Insurance

Market Cap

$3.3B

Beta

1.59

Analyst Sentiment

8/10 - List Neutral/Hold (Hold)

Click to enlarge

The firm builds and manages a full portfolio of insurance businesses. The firm’s price/book value is .67. AIZ is currently offering a 50% potential return, in the form of arbitrage, should it return to full book value.

Short Interest Note:
The short interest for the firm is
1.10% as of 07/15/2011.

6. Computer Sciences Corp. (NYSE: CSC)

Sector

Technology

Industry

Information Technology Services

Market Cap

$5.19B

Beta

1.1

Analyst Sentiment

10/13 - List Neutral/Hold (Hold)

Click to enlarge

The firm offers professional services, outsourcing, and IT. The firm’s price/book value is .69. CSC is currently offering a 44% potential return, in the form of arbitrage, should it return to full book value. In the last month CSC has lost in value 12.03%.

Short Interest Note:
The short interest for the firm is
3.00% as of 07/15/2011.

7. Legg Mason, Inc. (NYSE: LM)

Sector

Financial

Industry

Asset Management

Market Cap

$4.02B

Beta

2.01

Analyst Sentiment

10/19 - List Neutral/Hold (Hold)

Click to enlarge

The firm is principally an asset management firm for clients ranging from individuals to institutions. The firm’s price/book value is .71. LM is currently offering a 40% potential return, in the form of arbitrage, should it return to full book value. In the last month LM has lost in value 18.44%.

Short Interest Note:
The short interest for the firm is
3.30% as of 07/15/2011.

8. NRG Energy, Inc. (NYSE: NRG)

Sector

Utilities

Industry

Electric Utilities

Market Cap

$5.34B

Beta

.76

Analyst Sentiment

8/14 - List Buy/Outperform (Bullish)

Click to enlarge

The firm constructs and operates power plants. The firm’s price/book value is .72.

NRG is currently offering a 44% potential return, in the form of arbitrage, should it return to full book value. In the last month NRG has lost in value 7.71%.

Short Interest Note:
The short interest for the firm is
3.70% as of 07/15/2011.

9. E*TRADE Financial Corporation (Nasdaq: ETFC)

Sector

Financial

Industry

Investment Brokerage-National

Market Cap

$3.39B

Beta

2.19

Analyst Sentiment

10/16 - List Neutral/Hold (Hold)

Click to enlarge

The firm is an international investment brokerage firm. The firm’s price/book value is .73. ETFC is currently offering a 38% potential return, in the form of arbitrage, should it return to full book value. In the last month ETFC has lost in value 9.81%

Short Interest Note:
The short interest for the firm is 2.10% as of 07/15/2011.

10. KeyCorp (NYSE: KEY)

Sector

Financial

Industry

Money Center Banks

Market Cap

$6.92B

Beta

0.54

Analyst Sentiment

21/30 - List Neutral/Hold (Hold)

Click to enlarge

The firm is a financial holding and bank holding company that operates through multiple subsidiaries. The firm’s price/book value is .73. KEY is currently offering a 36% potential return, in the form of arbitrage, should it return to full book value. In the last month KEY has lost in value 14.1%

Short Interest Note:
The short interest for the firm is
2.20% as of 07/15/2011.

We hope this helps investors as they do their own homework and due diligence on companies that could be great potential arbitrage opportunities in the mid-cap company space.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.