Three Bargains Worth Considering

 | May 21, 2014 | 3:00 PM EDT  | Comments
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Earnings season is just about over and it has been a fairly lukewarm period for deep-value investors. Although most companies performed better than the dire forecasts predicted, the end results still show a pretty anemic performance for corporate America.

Earnings are up roughly 2% for S&P 500 companies and revenue growth was more than 2% this quarter. We did not see a big earnings beating that created additional inventory at a dramatic price. When a stock disappoints Wall Street and the shares plunge 50% or so and trade well below book value, it is often a fantastic opportunity.

I looked around the nooks and crannies of the stock market for any less dramatic opportunities that were created this earnings season. Some bargain issues were created as stocks fell after earnings releases. Several of them look like strong candidates for a long-term, deep-value portfolio.

International Shipholding (ISH) fell after earnings disappointed the analyst community. I own this stock and will be adding on further weakness in the shares. The stock has declined by a little more than 20% in the past month; it now trades at just 50% of book value. The company has a fleet of 46 ships, including car and truck carriers, dry bulk carriers and rail ferry vessels. Nine of the vessels are flagged under the Jones Act, which allows them to carry cargo between U.S. ports.

When I looked deeper into the earnings report, the company lost a lot of days due to weather and mechanical issues and they are still projecting full-year earnings before interest, taxes, depreciation and amortization (EBITDA), which is about 25% ahead of 2013. The dividend target is going to a payout of $1 a share, so the stock yields a generous 4.63%.

Tecumseh Products (TECU) is another old favorite that we may be repurchasing in the next few days. The stock made us a bunch of money a couple of years ago and I am anticipating similar results this time around. The company's recent earning report showed a loss and declining revenues for this manufacturer of compressors used in refrigeration and HVAC systems. The stock is down almost 17% in the past four weeks and now trades at just 45% of book value.

The stock had popped after a recapitalization plan was approved by shareholders in the first weeks of this month but the gains evaporated quickly in the aftermath of the poor earnings report. This company needs an improved economy for a robust earnings and profit recovery so it may take some time for this to work out. However, the shares could easily triple when the recovery does take hold. I would not be shocked to see a takeover offer for the company, as their compressor operations would be an attractive fit for several large equipment and machinery companies.

NASB Financial (NASB) is trading about 17% lower in May following its earnings report that came in below year-ago levels. The bank is located in Grand View, Mo. and has about $1.1 billion in assets. The bank has steadily worked down its performing assets from a high of over 8% of total assets to just 2.74% today. Conditions should continue to improve. The equity to assets ratio is over 17%, so the company has more than enough capital. The stock currently yields about 1.9% at the current price.

Insiders won a good amount of the outstanding shares, so they have some incentive to improve the earnings outlook and push the stock price higher over the next few years. After the price decline, the stock is trading at 86% of book value, so it is very close to becoming a bargain issue worthy of inclusion in a trade of the decade portfolio.

We have not seen any of the absolute collapse bargain creation events like we saw in the last quarter with Boardwalk Pipeline Partners (BWP). However, some nice pullbacks have created several deep-value bargains that patient, long-term investors should consider.

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