100 Stocks That Offer Deep Value

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Includes: ACAD, ACTS, ATV, FACT, HILL, HRAY, IDXG, MTSN, SOAP, TRIDQ
by: The Manual of Ideas

The Manual of Ideas research team recently jumped into the proverbial stock market "bargain bin" to try to uncover some compelling values. Here is what we found:

Price Does Not Equal Value

Former Columbia professor Benjamin Graham once said, “Price is what you pay; value is what you get.” Many investors agree with this statement – though only outside the investment arena. Few of us would refuse to buy an item in a department store just because it is on sale, yet many do just that when it comes to the stock market. The fear associated with buying a depressed stock, obviously, is that the price decline signifies a fundamental problem. Yet even if the decline has been caused by a decline in intrinsic value, the question is whether the price has declined more than the value erosion warrants. Disciplined investors try to estimate the intrinsic value of companies within their circle of competence and buy them when the price drops far below estimated value.

Graham-Style Value Has Outperformed

Economists Eugene Fama and Ken French have extensively studied the relationship between stock performance and book-to-market ratios. Their seminal paper covered the period from 1963-1990 and included nearly all stocks on the NYSE, Amex and Nasdaq stock markets. The stocks were divided into ten groups (deciles) based on book-to-market and were re-ranked annually. The highest book-to-market stocks outperformed the lowest book-to-market stocks by 21% to 8%, on average, with each descending decile performing worse than the previous. Fama and French also examined the beta of each decile and found that value stocks had lower risk, while growth stocks had the highest risk. The study had a profound impact in part because Fama was a long-time champion of the capital asset pricing model.

Relative Annual Performance of Value versus Growth Stocks, 1928-2008

Source: The Manual of Ideas, Kenneth R. French.

What We Mean By Ben Graham-Style Value

Ben Graham’s favorite approach to valuation was to emphasize the values evident on a company’s balance sheet. Unlike values derived from income statement and cash flow analysis, balance sheet values were deemed “safer” because they depended less on the value of a business as a going concern. If Graham could buy companies for less than the carrying value of their current assets net of all liabilities, he reasoned that he was might be a good deal.

Top 100 Companies Passing Deep Value Screen

The Manual of ideas recently published the results of a screen for companies meeting Ben Graham's criteria of value. Several of the companies on the list have net cash positions that are meaningfully above their recent market value. These ultra-cheap companies include Trident Microsystems (TRID), PDI (PDII), Hurray! (HRAY), Actions Semiconductor (NASDAQ:ACTS), Acorn International (NYSE:ATV), Mattson Technology (NASDAQ:MTSN), ACADIA Pharma (NASDAQ:ACAD), Facet Biotech (FACT), Soapstone Networks (OTC:SOAP), and Dot Hill Systems (NASDAQ:HILL).

The following are the Top 100 screen results, in alphabetical order:


Price MV EV Price/ Cash/
Company / Ticker Industry ($) ($mn) ($mn) T. Book MV
A.C. Moore Arts / ACMR Retail (Specialty Non-Apparel) 3.26 67 22 .4x 67%
ACADIA Pharma / ACAD Biotechnology & Drugs 0.95 35 -24 .7x 167%
Acorn International / ATV Appliances & Tools 3.25 93 -70 .5x 176%
Actions Semiconductor / ACTS Semiconductors 1.75 151 -117 .5x 178%
Adaptec / ADPT Computer Storage Devices 2.78 339 -31 .9x 109%
Anadigics / ANAD Semiconductors 3.19 202 103 .9x 49%
Arctic Cat / ACAT Recreational Products 3.90 71 74 .4x -5%
Ascent Media / ASCMA Broadcasting & Cable TV 24.99 352 10 .6x 97%
Audiovox / VOXX Communications Equipment 5.15 118 119 .4x -1%
AuthenTec / AUTH Semiconductors 1.89 54 -9 .7x 117%
Avanex / AVNX Communications Equipment 3.00 47 13 .7x 72%
Avigen / AVGN Biotechnology & Drugs 1.21 36 -5 .8x 113%
Axcelis Technologies / ACLS Semiconductors 0.50 52 97 .2x -88%
BE Semiconductor / OTC:BESIY Semiconductors 1.95 60 44 .5x 27%
Benchmark Electron. / BHE Electronic Instruments & Contr. 11.85 773 378 .8x 51%
BioForm Medical / BFRM Medical Equipment & Supplies 1.06 49 4 .7x 91%
Bookham / BKHM Communications Equipment 0.60 61 16 .5x 73%
Cascade Microtech / CSCD Scientific & Technical Instrum. 3.03 40 8 .5x 81%
CCA Industries / CAW Personal & Household Products 3.07 22 9 .8x 57%
CE Franklin / CFK Oil Well Services & Equipment 4.87 90 119 .9x -33%
Clarus Corp. / CLRS Misc. Financial Services 4.10 71 -15 .8x 121%
Communications Systems / JCS Communications Equipment 7.90 65 39 .8x 41%
Comverse Technology / CMVT Software & Programming 6.90 1,394 400 .7x 130%
Crocs / CROX Footwear 2.29 190 161 .8x 15%
Cutera / CUTR Medical Equipment & Supplies 6.30 84 -14 .8x 116%
Cynosure / CYNO Medical Equipment & Supplies 6.21 79 5 .6x 93%
Dot Hill Systems / HILL Computer Storage Devices 0.74 35 -21 .5x 162%
Electro Scientific / ESIO Electronic Instruments & Contr. 8.25 224 65 .6x 71%
Facet Biotech / FACT Biotechnology & Drugs 9.20 226 -145 .5x 164%
Flexsteel Industries / FLXS Furniture & Fixtures 6.32 42 53 .4x -28%
Footstar / OTC:FTAR Retail (Apparel) 2.90 62 6 .6x 91%
Fuqi International / OTCPK:FUQI Jewelry & Silverware 5.16 114 77 .9x 32%
Gencor Industries / GENC Construction & Agricultural Ma. 7.55 73 20 .7x 72%
Gravity / GRVY Software & Programming 1.00 28 -14 .6x 149%
GTSI / GTSI Computer Hardware 4.16 42 73 .5x -75%
Gushan Environmental / GU Oil & Gas - Integrated 2.26 189 48 .6x 75%
Hardinge / HDNG Misc. Capital Goods 4.91 57 66 .4x -17%
Harvest Natural / HNR Oil & Gas Operations 4.62 152 55 .6x 64%
Heelys / HLYS Footwear 1.84 51 -18 .6x 135%
Himax Technologies / HIMX Semiconductors 2.74 521 372 1.2x 29%
Horsehead / ZINC Metal Mining 7.27 256 134 .9x 48%
Hudson Highland / HHGP Business Services 1.81 46 2 .4x 96%
Hurray! / HRAY Communications Services 1.50 33 -27 .5x 181%
Hutchison Telecom / HTX Communications Services 4.80 1,541 2,628 2.3x -71%
Ikanos Comms / IKAN Communications Equipment 1.37 40 -19 .5x 149%
Imation / IMN Computer Services 10.30 386 283 .7x 27%
Ingram Micro / IM Computer Hardware 13.65 2,205 1,920 .8x 13%
Integrated Silicon / ISSI Semiconductors 2.10 54 8 .5x 85%
Intellon / ITLN Semiconductors 2.13 67 11 1.0x 83%
iPass / IPAS Software & Programming 1.05 64 -4 .7x 106%
KHD Humboldt Wedag / KHD Construction & Agricultural Ma. 8.81 269 -132 1.0x 149%
K-Swiss / KSWS Footwear 9.70 338 136 1.1x 60%
L.S. Starrett / SCX Misc. Capital Goods 9.76 65 63 .4x 3%
LeapFrog / LF Recreational Products 1.89 121 42 .8x 66%
Linktone / LTON Computer Services 1.56 66 -30 .6x 146%
LookSmart / LOOK Computer Services 1.36 23 -8 .8x 134%
MarineMax / HZO Retail (Specialty Non-Apparel) 3.96 73 388 .3x -429%
Mattson Technology / MTSN Semiconductors 1.24 62 -42 .4x 168%
MEMSIC / MEMS Semiconductors 2.55 60 -6 .7x 109%
ModusLink Global / MLNK Computer Services 3.88 177 42 .6x 76%
Movado Group / MOV Jewelry & Silverware 8.80 215 193 .5x 10%
Nam Tai Electronics / NTE Electronic Instruments & Contr. 3.93 176 -53 .6x 130%
Natuzzi / NTZ Furniture & Fixtures 1.35 74 15 .1x 80%
Noah Education / NED Schools 2.97 119 -31 .7x 126%
Northstar Neuroscience / OTC:NSTR Medical Equipment & Supplies 1.93 51 -14 .8x 127%
Nu Horizons / NUHC Electronic Instruments & Contr. 2.77 52 107 .4x -108%
Opnext / OPXT Semiconductors 2.16 197 42 .6x 79%
PC Connection / PCCC Retail (Catalog & Mail Order) 4.75 128 86 .7x 33%
PDF Solutions / PDFS Semiconductors 1.68 44 4 .8x 90%
PDI / PDII Business Services 3.29 47 -44 .6x 193%
Pomeroy IT Solutions / PMRY Computer Hardware 3.41 32 0 .4x 100%
QLT / QLTI Biotechnology & Drugs 1.98 108 -57 .3x 153%
Rackable Systems / OTCPK:RACK Computer Hardware 4.57 138 -34 .6x 125%
Rewards Network / DINE Business Services 3.50 96 87 1.1x 9%
Richardson Electron / RELL Electronic Instruments & Contr. 3.84 69 89 .6x -29%
Rocky Brands / RCKY Footwear 4.31 24 107 .5x -351%
Rudolph Technologies / RTEC Semiconductors 4.62 142 64 .9x 55%
Schuff International / SHFK Construction Services 12.82 91 67 .6x 27%
Sierra Wireless / SWIR Communications Equipment 5.52 171 90 .6x 47%
Skechers / SKX Footwear 9.30 430 332 .6x 23%
SMART Modular / SMOD Semiconductors 2.12 131 87 .6x 34%
Soapstone Networks / OTC:SOAP Communications Equipment 3.68 55 -34 .6x 163%
Superior Uniform / SGC Apparel/Accessories 7.00 42 41 .7x 2%
Syneron Medical / ELOS Medical Equipment & Supplies 6.53 179 -10 .8x 106%
Tech Data / TECD Computer Hardware 26.51 1,328 1,219 .8x 8%
The9 Limited / NCTY Business Services 9.32 250 -75 .6x 130%
TheStreet.com / TSCM Computer Services 2.42 74 2 .7x 98%
TomoTherapy / TOMO Medical Equipment & Supplies 2.88 150 -5 .7x 103%
Trans World / TWMC Business Services 0.61 19 2 .1x 92%
Trident Microsystems / TRID Semiconductors 1.45 91 -121 .4x 233%
Tuesday Morning / TUES Retail (Department & Discount) 2.55 110 106 .5x 3%
Ultra Clean Holdings / UCTT Semiconductors 1.77 38 27 .5x 30%
Universal Stainless / USAP Iron & Steel 12.08 81 68 .6x 16%
Volt Information / VOL Business Services 7.85 164 154 .6x 6%
Voltaire / OTC:VOLT Computer Hardware 2.44 51 -2 .9x 104%
Voyager Learning / VLCY Printing & Publishing 1.83 55 -26 .9x 147%
West Marine / WMAR Retail (Specialty Non-Apparel) 5.20 115 155 .6x -34%
Xyratex / XRTX Computer Storage Devices 3.34 98 65 .5x 34%
Zapata / ZAP Misc. Financial Services 5.80 112 -43 .7x 138%
Zygo / ZIGO Semiconductors 4.97 84 36 .6x 57%

Disclosure: Long GRVY and HNR. No positions in the other companies mentioned in this article.