Time to Fish for Value Stocks

 | Jan 22, 2014 | 12:00 PM EST  | Comments
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Stock quotes in this article:

esca

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sli

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esp

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tis

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cmg

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bac

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hwcc

As both a self-described "value" investor and a columnist for RealMoney, I find myself between a rock and a hard place. The market is jubilant, volatility is low and equities are making money again for investors.

So everyone wants to know what stocks to buy today. The problem for me is that these are the times when it becomes more difficult to suggest stock ideas. I can easily name dozens of wonderful businesses, but a wonderful business does not make a wonderful investment.

An example is Chipotle (CMG), a magnificent company in more ways than one. I loved it as an investment two years ago at $250 -- not so much now at $525. I still hold the shares I bought back then and I eat there twice a week. But I can only sit and wait for another buying opportunity. I loved Bank of America (BAC) under $10; it's still not a bad bet today but not as obvious as it was two years ago.

I don't stop searching because stock prices are moving up. Therefore, the rest of this column consists of names I've come across thumbing through pages of the Value Line Investment Survey. The one pagers produced by VL are excellent snapshots into a company and provide more insight than any one page of information. That's all I've looked at, but it's enough to pass along the fishing pole to you and get you casting for fish.

Houston Wire and Cable (HWCC) is distributor of specialty wire and cable products. The market cap is $240 million valuing the company at 25x earnings, a high raw multiple. But HWCC is a solidly profitable company, with a decent 3.4% yield. The market has been tough for HWCC but it's an industrial company to think about.

Orchid Paper Products (TIS) is another small-cap trading for $31 a share valuing the company at $250 million. TIS is a private-label maker of tissue paper products. The shares yield 4.5% and the balance sheet is debt free. The current price values the company at 20x trailing and 16x forward earnings.

Espey Manufacturing and Electronics (ESP) is a $70 million micro-cap specialty electronics company supporting military and industrial applications in the U.S. The shares trade for $32, or 13x earnings and yield 3.2 percent. SL Industries (SLI) is another electronics manufacturer serving similar niche markets. Its shares trade for $26 or 10x trailing and 9x forward earnings. SLI's market cap is $110 million and there is little net debt on the balance sheet.

Escalade (ESCA) is a maker of sporting goods and information security products in the U.S. and Europe. The company boasts a market cap of $160 million and yield 3.2%.

There are dozens of small and large companies that still look attractive "on paper." Many may not pass the test but now is the time to look through them all

Columnist Conversations

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