Consumer Stocks Below Book Value

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Includes: AVHI, BFCF, BRLC, DDS, FINL, HVT, SCVL, SMRT, TWMC, VOXX, WMAR
by: Alan Brochstein, CFA

I have addressed previously the potential for bargains in the Consumer Discretionary sector, focusing on extreme negative price momentum. After reviewing Shoe Carnival (NASDAQ:SCVL) yesterday, I decided to go about it slightly differently. Using StockVal, I sorted for stocks in the sector with market capitalization in excess of $100mm that were trading at or below book value with nominal intangibles. Further, I restricted the list to companies that had reported positive net income over the past year with maximum debt to capital ratios of 65%. Finally, I eliminated any company with insider selling over the past three months (using Insider Scoop).

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The list is rather eclectic. While certainly there may be some great reasons why these stocks are being sold below theoretical liquidation value (overvalued assets such as inventory, receivables or PPE perhaps), I am willing to bet that some of these stocks have been sold solely due to declining fundamentals by people who pay more attention to other measures of valuation (like PE). Just a starting point! As I disclosed yesterday, I may buy SCVL.

Disclosure: No positions in any of these stocks