• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

Kicking Rocks in Search of Stocks

Safe and cheap stocks are rare right now, but here are a few that I have found.
By TIM MELVIN Jan 06, 2014 | 01:30 PM EST
Stocks quotes in this article: RDC, LACO, TWMC

It is the first week of trading in the new year, and it looks to be a busy one, according to the traders I talked to today. We have all sorts of economic news, including the ADP and jobs reports that have been market movers in recent months. Desks and research departments will be fully staffed again, and worst of all, Congress comes back into session this week, so we can look forward to some potentially idiotic news. This morning, I sat down, muted the TV and ran my screens for the first time this year.

The results are as depressing as the weather forecasts for the northern part of the nation. There simply are not a whole lot of stocks for deep-value investors to choose from. Each month, the list of stocks that are safe and cheap according to my basic measures has shrunk. Inventory is disappearing as prices climb, but very few stocks are falling to levels that draw my enthusiasm and cash expenditure. Net-nets -- stocks that trade for less than the cash per share on the company's balance sheet -- are virtually nonexistent at the moment, as are negative-enterprise stocks that are not biotechs. It is a tough time for a deep-value type to put new money to work.

There are still some opportunities around if you are just coming into the game with a batch of new money to put to work, and this week we will kick some serious rocks, looking for stocks to buy. Unless we get a crash this week, we won't be able to come up with anywhere near a fully invested portfolio, but I suspect that will turn out to be a good thing. There are still a lot of flashing lights and a lot of very smart people expressing concerns about market levels.

If you do not already own the stock, then shares of Rowan Companies (RDC), a drilling-services company, are worth considering here. Some analysts around the Web have been criticizing Rowan for hoarding cash and not taking on more debt to expand the business or buy back stock, but I am pretty content with the company's choices in the current environment. Rowan will take delivery of four new deep-water rigs in the next few years, and this could drive earnings and the stock price higher over the next several years. The stock trades at just 89% of book value and earns a Piotroski F-score of 7. I have done well with this stock in the past and expect to do even better over the next three to five years.

Lakes Entertainment (LACO) is going to make the grade this year. The casino operator lost a contract to run an Indian casino last year, and that has hurt operations, but prospects are improving, Lakes got a large cash payout form the tribe, and its new Maryland casino is up and running with strong early results. The company is apparently a little worried about attracting the wrong kind of attention, as it recently adopted an anti-takeover rights offering as a potential defense. The stock is trading at just 82% of tangible book value and has more than 75% of the share price in cash and short-term investments on the books. The F-score is 5 right now, but I expect that to improve as the new casino continues to add to the bottom line.

My lone retail stock pick from 2013 remains a buy as well. Trans World Entertainment (TWMC) continues to move toward higher-margin merchandise and less dependence on the music and video business. The company trades at about 76% of book value and earns an F-score of 6 right now. Trans World has negligible debt and more than half of the stock price in cash on the balance sheet, so it has the financial strength and flexibility to survive until it can thrive when consumer spending picks up.

Using the screen for safe and cheap stocks, I'm not seeing a lot of buys right now. The vast majority of stocks I have uncovered have less than $50 million in market cap and are too illiquid to write about here. While older portfolios may be more fully invested, it is going to be tough to get new money to work at the moment, but I will keep kicking rocks and looking for stocks.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Melvin was long RDC, LACO and TWMC.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider LACO and TWMC to be small-cap stocks.  You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

TAGS: Investing | U.S. Equity

More from Investing

Question of the Day: Where's the Melt-up?

Helene Meisler
Apr 15, 2021 6:00 AM EDT

Yes, the emotions are hard at work in this market -- so let's look under the hood and see what's making that ... chopping noise.

S&P Loses Some Shine on Coinbase IPO

James "Rev Shark" DePorre
Apr 14, 2021 4:23 PM EDT

The initial public offering turned out to be a bit of a dud, but that may be what the market needs.

Amgen Looks Ready for an Upside Breakout

Bruce Kamich
Apr 14, 2021 2:45 PM EDT

Traders could go long at current levels risking below $240 for now.

Coinbase's Market Cap Is Too Huge for Competitors to Ignore It Any Longer

Timothy Collins
Apr 14, 2021 2:23 PM EDT

Yes, COIN is only one company, one stock, but it's a mountain of emotion right now.

Here's How I'd Treat Regeneron

Bruce Kamich
Apr 14, 2021 2:10 PM EDT

It looks like it's time to go long Regeneron, as the charts have improved.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:42 PM EDT PAUL PRICE

    Wednesday on Real Money Pro

    Make this stock a 'part' of your portfolio.
  • 04:44 PM EDT PAUL PRICE

    Pretty Incredible + Hard to Believe

  • 11:18 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    The 5 Pillars of Exceptional Trading
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

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

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.

FactSet 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.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login