Do the Tighten Up

 | Dec 12, 2011 | 12:36 PM EST  | Comments
  • Comment
  • Print Print
  • Print
Stock quotes in this article:

cmtl

,

sup

,

jakk

,

belfa

,

rimg

It's sometimes interesting to really tighten up your criteria when you are on the hunt for value opportunities (especially in this type of environment), when they are somewhat difficult to find. The pickings are very slim at this point, as the rising broader markets have lifted many boats; certainly not all, but you can really narrow the field even further.

Some of my value searches are based on the premise that companies trading cheap relative to their assets can outperform over the long haul. While this rarely, if ever works in the short term, and is certainly not a trading strategy, it can pay benefits for the most patient investors.

To that end, I've adapted one of my deep value screens to identify companies with the following attributes:

  • Market caps greater than $100 million
  • U.S. companies only
  • No financials
  • Trading at less than 2x net current asset value (NCAV; defined as current assets minus total liabilities.)
  • Cash to market cap ratio of at least 33%
  • Companies must pay a dividend

This is an extremely stringent search, especially with the addition of the last two criteria, and just five names made the cut. Frankly, I'm a bit surprised any names did.

In terms of market cap, Comtech Telecommunications (CMTL) top of list. It is a member of the S&P 500 Small-Cap Index, and currently trades for just 1.79x NCAV. The company ended the most recent quarter with $473 million, or $20.39 per share in cash, which is roughly two-thirds of the company's current market cap. Comtech pays a $0.275 quarterly dividend and currently yields 3.5%. The current dividend was raised 10% over the summer, from the previous $0.25. I tend to shy away from companies that have either "tech" or "communications" in their name, but this one may be worth further scrutiny.

Superior Industries (SUP), which is one of the largest OEM suppliers of aluminum wheels, also made the cut. The company has been beaten up pretty badly this year, and tis shares are down about 37% since April. Last quarter was no picnic either, as earnings per share (EPS) of $0.16 came in well below the consensus estimate of $0.34. Currently, SUP trades for 1.73x NCAV, and has $147 million, or about $5.40 per share in cash, and no debt. The company pays a $0.16 quarterly dividend, which equates to healthy 3.8% yield.

Other names that met the criteria were Jakks Pacific (JAKK), which turned down a buyout offer from Oaktree Capital Management earlier this fall, Bel Fuse (BELFA) and Rimage (RIMG). Rimage, which is a recent discovery of fellow Real Money contributor Tim Melvin, currently trades below net current asset value, making it the only member on this list that is also a net/net. The company also recently hiked its quarterly dividend 70% to $0.17, putting the indicated dividend yield at 6.1%.

Columnist Conversations

Ford is working on its third straight gain following two days of steep loses to start this week. At this...
Market is holding on for gains for now but think Doug Kass is right and could see some decent profit taking by...
I have a full blown article surrounding the U.S. Retail Sector coming out on soon, but for now let's just lo...
The dividend action is pretty quiet at the moment, but I wanted to point out for those generating income with ...

BEST IDEAS

REAL MONEY'S BEST IDEAS

Columnist Tweets

BROKERAGE PARTNERS

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.


TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.