Picking Value Stocks by the Numbers

 | May 08, 2012 | 1:00 PM EDT  | Comments
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Stock quotes in this article:

agys

,

wrls

,

cresy

Sometimes the stock market creates statistically interesting stocks that for that reason alone are worth a closer look. The late, great value investor Ben Graham often chose his investments purely on the basis of the metrics he found in the financial statements. What the business actually did was a secondary consideration. In that spirit, I'll share some names that have interesting numbers.

Agilysys (AGYS) is a small-cap provider of IT solutions to businesses and the public sector. The company provides these services to hotels, restaurants and retailers as well as government agencies. Shares trade for $8.70, and the company has nearly $4 a share in net cash on the balance sheet. It's an interesting business, because once you get a customer, switching costs are very high. Profits are few and far in between, but the cash-flow statement looks stronger.

Tellular (WRLS) is another provider of wireless systems and services that support security systems for homes and businesses. This is another small-cap, debt-free business that is not only profitable but buying back shares and paying shareholders a tidy yield of 5%.

Argentina's Cresud (CRESY) has seen shares nearly halved in a short period of time. Trading at $8.70, they now trade for 90% of book value. But true book value is likely vastly above stated book value. Cresud owns some of the most fertile farmland in South America as well as majority interest in one of Argentina's largest real estate companies, IRSA (IRS). Cresud's current market cap is $435 million. Cresud's stake in IRSA is worth about $200 million, on the basis of current market valuations. So Cresud's 450,000-plus hectares are being valued at $250 million when they are probably worth three times that amount. A lot of Cresud's land was purchased many, many years ago, and a lot of the land is profitable farmland.

The issue is the politics in Argentina. The recent expropriation of a Spanish energy business has everyone dumping shares of Argentine-based companies. That selloff is turning Cresud into a steal. It's worth keeping a close eye on this one because of where the share price is today.

Numbers can sometimes be alluring, but they can also provide the veil of protection that an investor needs. Investors are on edge again today, and that can often lead to some statistical inefficiencies.

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