Seeking Almost-Perfect Stocks

 | Jun 18, 2013 | 4:00 PM EDT
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Sometime in the next 24 hours, we will hit Fed fever pitch as pundits and prognosticators attempt to guess the outcome of the Fed meeting. Everyone will be breathless to see if the Federal Open Market Committee's statement includes language about tapering or otherwise unwinding quantitative-easing programs.

My personal guess is that the committee has seen a chart of the bond market in the past few weeks and will tiptoe around the question to avoid spooking the markets. It is worth noting that my personal guess is just as worthless as all the other estimates, guesses and predictions that are floating around. I am in the cheap-stock business, not the wild market guessing game, so I will stick with my rock-kicking. If something extreme happens as a result of the Fed announcement, I will be in a position to react to it, but I am not making stock market wagers on what the Fed may or may not say on Wednesday.

Today I reset my screen to look for almost-perfect stocks. These stocks are trading for less than book value and are profitable and well financed but do not pay a dividend right now. Although I am a big fan of dividends, not all companies are in a position to pay them, or they prefer to use excess cash to buy back shares. As long as the buyback is done at prices lower than the value of the company, I believe this is an acceptable practice. Others use their cash to grow the business, and some safe and cheap stocks are in a trough and are just muddling through and need to conserve cash right now.

One of the more interesting companies on the list from a long-term perspective is Northwest Pipe (NWPX). The shares trade just below book value, and the company is profitable. Business for this company is not spectacular right now, but there are lots of reasons to believe that it will accelerate sometime in the next decade. Northwest makes pipes for water transmission and other drinking-water-related infrastructure projects. The tubular division makes pipes used in the oil and gas industry, construction and the agricultural industry. Given the stall speed of the economy, none of the businesses are particularly robust at the moment, but all should experience very high rates of growth when the economy does finally get back on track. Five years ago, this was a $60 stock. I believe it will be that and more before too many years go by.

I am particularly intrigued by Steel Partners Holdings (SPLP). This is a conglomerate of business run by Warren Lichtenstein, who has run a hedge fund by the same name for some time now. Steel Partners owns controlling stakes in wide range of businesses and has minority positions a few other companies. This is basically a deep-value activist hedge fund that has stakes in a wide range of industries, from hot dogs to defense contractors. Lichtenstein has overseen several successful turnarounds during his career as an activist investor, and he should be able to help the portfolio companies see marked improvement in performance over time. This should be an excellent long-term holding for most investors.

There is yet another silver miner on the list, as the miners continue to be punished by traders and investors. Coeur Mining (CDE) operates in the U.S., Latin America and Australia. The company has a solid cash position and has been buying back stock to take advantage of the current low valuation.

The company is focusing on its domestic operations to avoid some of the political risk of mining, particularly in Latin American markets. Several mines have had to close or curtail operations recently because of political problems, and management wants to avoid these potentially costly problems. The stock is trading at just 60% of tangible book value, and the company is profitable. I have no idea what gold and silver prices will do in the short run, but I am pretty sure that buying the largest domestic producer of silver and second-largest producer of gold at a steep discount to asset value should pay off for patient investors.

Although I am kicking rocks and looking for value, I am not running to press the "buy" button right now on most stocks. If you do not already own silver miners such as Coeur Mining, Pan American Silver (PAAS) or Hecla Mining (HL), you should probably buy some here. On the other two stocks, I will sit back and hope the Fed scares the market into some panic selling, to enable me to buy them lower.

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we like this chart here, it appears ready to move higher. BOUGHT BZUN OCT 35 CALL AT 3.40
Large-cap, high-quality McKesson (MCK) is too cheap now, at $147.51 or so. The stock hit $243.60 more than 2.5...
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