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One of my rules of thumb in equity investing is that if I buy companies trading below tangible book value, with earnings yields over 10%, it is difficult to lose value, and the odds favor gaining value.

But there are some caveats:

  • Analyze the balance sheet, highly indebted companies are not to be trusted, but that varies by industry.
  • Longer dated assets, like property, plant & equipment should be discounted.
  • Banks and REITs must be scrutinized carefully, because of their weak liability structures.
  • Foreign companies need extra scrutiny, because the disclosures are often not as good. This goes triple for Chinese companies.
  • Make sure you are not investing in a “buggy whip” industry, particularly in the era of the internet. How can your company be disrupted?

The idea is a simple one. Buy companies below their tangible book value when they have good earnings, and good earnings prospects. Over a long enough period of time, the growth in tangible book value will help drive growth in the stock price.

For companies with over $100 million in market capitalization, here are the companies that fit this description:

Company Ticker Img_desc Country Exchg_desc P/TB P/E Expected P/E Mkt cap LT Debt/ Equity
AerCap Holdings N.V. AER 0939 – Rental & Leasing Netherlands N – New York

0.66

7.6

5.2

1524.4

263.6

Aircastle Limited AYR 0939 – Rental & Leasing United States N – New York

0.64

8.4

8.1

931.2

202.1

American International Group, AIG 0715 – Insurance (Property & Casualty) United States N – New York

0.55

2.9

9.8

56637

73.6

Anworth Mortgage Asset Corpora ANH 0933 – Real Estate Operations United States N – New York

0.94

7.8

7.9

917.8

3.8

Assurant, Inc. AIZ 0709 – Insurance (Life) United States N – New York

0.74

5.7

6

2992.7

19.6

AXA (ADR) OTCQX:AXAHY 0709 – Insurance (Life) France O – Over the counter

0.88

7.6

5.8

29204.3

21.5

Axis Capital Holdings Limited AXS 0715 – Insurance (Property & Casualty) Bermuda N – New York

0.86

8.3

8.8

4325.9

19.3

AXT, Inc. AXTI 1033 – Semiconductors United States M – Nasdaq

0.94

7.5

9.9

129

2.8

Banco Bilbao Vizcaya Argentari BBVA 0724 – Money Center Banks Spain N – New York

0.9

8.7

6

34554.8

250.4

Barclays PLC (ADR) BCS 0727 – Regional Banks United Kingdom N – New York

0.42

6.9

3.6

31291.9

44.7

Callon Petroleum Company CPE 0609 – Oil & Gas Operations United States N – New York

0.86

1.7

5.8

171.6

62.6

Chimera Investment Corporation CIM 0703 – Consumer Financial Services United States N – New York

0.73

4.6

5.3

2434.6

59.2

China Gerui Adv Mtals Grp Ltd CHOP 0121 – Iron & Steel China M – Nasdaq

0.55

2.3

1.7

157.4

0

China Zenix Auto International ZX 0415 – Auto & Truck Parts China N – New York

0.49

1.8

1.4

127.3

0

Citigroup Inc. C 0724 – Money Center Banks United States N – New York

0.53

7.4

5.8

77291.7

165.3

Corning Incorporated GLW 1024 – Electronic Instruments & Controls United States N – New York

0.95

8

8.4

19410

14.7

Crexus Investment Corp CXS 0933 – Real Estate Operations United States N – New York

0.85

6.6

9.4

779.2

0

Deutsche Bank AG (USA) DB 0727 – Regional Banks Germany N – New York

0.65

7.6

4.7

31543.1

318.7

GeoEye Inc. GEOY 0909 – Business Services United States M – Nasdaq

0.8

7.3

8.7

358.5

97.6

Hardinge Inc. HDNG 0218 – Misc. Capital Goods United States M – Nasdaq

0.74

8

7.4

105.1

4.3

Homex Development Corp. (ADR) HXM 0215 – Construction Services Mexico N – New York

0.91

8.6

5.5

846.4

85.4

Ingles Markets, Incorporated IMKTA 0957 – Retail (Grocery) United States M – Nasdaq

0.91

9.9

8.2

400

183.1

Ingram Micro Inc. IM 1006 – Computer Hardware United States N – New York

0.77

9.6

7.6

2591.2

8.7

Jinpan International Limited JST 1024 – Electronic Instruments & Controls China M – Nasdaq

0.85

5.3

4.7

132

0.8

Kelly Services, Inc. KELYA 0909 – Business Services United States M – Nasdaq

0.77

6.4

7.4

462.9

0

KeyCorp KEY 0727 – Regional Banks United States N – New York

0.83

8.4

9.5

7339.2

90.7

KKR Financial Holdings LLC KFN 0718 – Investment Services United States N – New York

0.89

5.1

4.7

1557.4

0

Knightsbridge Tankers Limited VLCCF 1118 – Water Transportation Bermuda M – Nasdaq

0.61

6.9

9.4

215.2

42

KT Corporation (ADR) KT 0915 – Communications Services South Korea N – New York

0.89

9

7

7041.3

72.6

Le Gaga Holdings Ltd ADR GAGA 0509 – Crops Hong Kong M – Nasdaq

0.89

8.1

4.1

200.3

5.3

Lihua International Inc LIWA 0127 – Misc. Fabricated Products China M – Nasdaq

0.7

3.1

2.1

161.3

0

LUKOIL (ADR) OTCPK:LUKOY 0606 – Oil & Gas – Integrated Russia O – Over the counter

0.68

4.2

4

47753.8

10.4

Mechel OAO (ADR) MTL 0124 – Metal Mining Russia N – New York

0.8

4.6

3.5

3322.6

139.6

Metlife Inc MET 0709 – Insurance (Life) United States N – New York

0.69

5.7

5.4

32402.5

45.3

Mizuho Financial Group Inc. (A MFG 0727 – Regional Banks Japan N – New York

0.9

3.5

8.5

40165.5

236.3

Navios Maritime Holdings Inc. NM 1118 – Water Transportation Greece N – New York

0.53

4.6

7.6

350.3

131.3

Newfield Exploration Co. NFX 0609 – Oil & Gas Operations United States N – New York

0.98

5.9

8.8

3943.1

72.2

Olympic Steel, Inc. ZEUS 0127 – Misc. Fabricated Products United States M – Nasdaq

0.86

8.8

6.4

181.8

95.4

Orbotech Ltd. ORBK 1033 – Semiconductors Israel M – Nasdaq

0.78

6.3

9.7

329.7

13.1

Patterson-UTI Energy, Inc. PTEN 0612 – Oil Well Services & Equipment United States M – Nasdaq

0.93

6.6

8.3

2276.5

18.7

Petroleo Brasileiro SA (ADR) PBR 0606 – Oil & Gas – Integrated Brazil N – New York

0.9

6.8

6.3

126006.1

43.5

Phoenix Companies, Inc., The PNX 0709 – Insurance (Life) United States N – New York

0.21

3.6

3.7

203.5

45

Popular, Inc. BPOP 0727 – Regional Banks Puerto Rico M – Nasdaq

0.52

8.9

6.1

1664

47.1

Protective Life Corp. PL 0709 – Insurance (Life) United States N – New York

0.7

7.2

8

2557

53

Reinsurance Group of America I RGA 0706 – Insurance (Accident & Health) United States N – New York

0.68

7.8

7.2

4059.3

34.9

Republic Bancorp, Inc. KY RBCAA 0727 – Regional Banks United States M – Nasdaq

0.94

4.7

8.7

489.6

7.7

REX American Resources Corp REX 0103 – Chemical Manufacturing United States N – New York

0.65

7.8

6.8

163.9

41

Royal Caribbean Cruises Ltd. RCL 1118 – Water Transportation United States N – New York

0.71

9.7

9.5

5542.1

91.9

Societe Generale SA (ADR) OTCPK:SCGLY 0724 – Money Center Banks France O – Over the counter

0.29

5.8

3.8

16945.2

20.7

StanCorp Financial Group, Inc. SFG 0706 – Insurance (Accident & Health) United States N – New York

0.84

2.5

8.7

1676.1

14.8

StealthGas Inc. GASS 1118 – Water Transportation Greece M – Nasdaq

0.38

8.5

5

122.1

98.5

Symetra Financial Corporation SYA 0709 – Insurance (Life) United States N – New York

0.47

7.8

8.5

1494.6

0

Tech Data Corp TECD 1006 – Computer Hardware United States M – Nasdaq

0.96

9.8

8

1918.9

2.9

Ternium S.A. (ADR) TX 0121 – Iron & Steel Luxembourg N – New York

0.81

8.3

5.8

3993.4

26.2

Thompson Creek Metals Company, TC 0124 – Metal Mining United States N – New York

0.33

3.5

5.7

563.9

20.8

Transportadora de Gas del Sur TGS 0609 – Oil & Gas Operations Argentina N – New York

0.43

5.6

7.5

191.7

80.6

TravelCenters of America LLC TA 0963 – Retail (Specialty Non-Apparel) United States A – American

0.51

4

3.7

145

31.9

Triple-S Management Corp. [[GTS] 0806 – Healthcare Facilities Puerto Rico N – New York

0.76

9.4

8.6

510.6

18.2

Unit Corporation UNT 0612 – Oil Well Services & Equipment United States N – New York

0.94

8.7

9

1819.7

15.8

Valero Energy Corporation VLO 0609 – Oil & Gas Operations United States N – New York

0.86

9.1

5.6

13578.5

40.5

Vishay Intertechnology VSH 1033 – Semiconductors United States N – New York

0.97

7.7

7.1

1433.8

23.4

Woori Finance Holdings Co., Lt WF 0727 – Regional Banks South Korea N – New York

0.57

4.5

4.8

8482.1

0

Xinyuan Real Estate Co., Ltd. XIN 0215 – Construction Services China N – New York

0.33

2

2.1

215.1

8.8

Yongye International Inc YONG 0103 – Chemical Manufacturing China M – Nasdaq

0.55

1.9

1.3

163.7

2.8

ZHONGPIN INC. HOGS 0515 – Food Processing China M – Nasdaq

0.89

6.6

5.5

371.9

18.1

Zuoan Fashion Ltd (ADR) ZA 0403 – Apparel/Accessories China N – New York

0.6

2.4

1.8

102.1

0

Full disclosure: long AIZ, PBR, RGA, SFG, VLO

Also, be wary of Chinese companies, I mean it.

Source: On Growing Embedded Value