Value stocks are not cheap stocks, although one of the places you can look for candidates is on the list of stocks that have hit 52-week lows.
Investors like to think of value stocks as bargains. The market has under valued the stock for a variety of reasons and the investor hopes to get in before the market corrects the price.
Here are some characteristics of a value stock:
The price earnings ratio (P/E) should be in the bottom 10% of all companies.
A price to earning growth ration (PEG) should be less than 1, which indicates the company is undervalued.
There should be at least as much equity as debt.
Current assets at twice current liabilities.
Share price at tangible book value or less.
2010
One way to find value stocks is to look for bad-news-led big sell-offs such as Schlumberger Limited (NYSE: SLB) on speculation it spent too much acquiring SSI, Toyota Motor Corporation (NYSE: TM) due to a large recall, and BP plc (NYSE: BPv) and Transocean Ltd. (NYSE: RIG) due to the Gulf oil spill, is that all of these stocks give investors the rare opportunity to buy value at a discounted price.
The thinking is that the only time you can find an undervalued stock is during a time of irrationality. But how do we determine the difference between really bad news and deadly news ― for example, the difference between the bad news Transocean received and the bad news Bear Stearns received?
Transocean was a solid company with very good earnings, not to mention that it is the largest offshore driller in the world. Oil spills have happened before and will happen again, but there is no way in hell that we were going to stop drilling for oil. On the other hand, we had no idea of the size of the debt Bear Stearns had on its books, nor the leverage multiple they were trading under.
Currently, while SLB and Halliburton have had enormous rallies, RIG has been going down, down, down as a laggard, but is now showing a Buy Signal. Buy RIG, short SLB., more or less market neutral.
RIG is a "value" stock play at this very moment.
http://finance.yahoo.com/echarts?s=RIG+I...
Not advice, but rather defined opportunity with reduced risk in manner and method as part of a Plan. Your Plan.
Question to value investors: could you throw a couple of tickers at me with great value stocks that have realised by now?
I am learning value investing and wanted to look at a more recent example (post-crisis) of a value stock and how it progressed.
Ideally something from 2010+
Thanks!
