Whenever markets are climbing higher and the general view is that stocks are priced fully or slightly overvalued, I revisit simple stock screens to see what makes the list. I like to start with the Value Line database, which has more than 3,000 stocks. There are several quick screens I run through to see what ideas may be out there.
One screen looks at stocks trading at the widest discount from book value. Topping the list here is Alpha Natural Resources (ANR). This coal miner has been selling off consistently. Its shares trade at just above $2, which values the company at $500 million. Its balance sheet net debt tops $2.5 billion, however. Shareholders' equity per share equals $16 but that primarily consists of property, plant and equipment. Regional airline SkyWest (SKYW) also shows up on this list; its shares are trading for $8, against tangible book value of above $25 per share.
Another simple value screen looks at stocks with the lowest P/E ratio. PDL Biopharma (PDLI) tops the list with a P/E of less than 5 and a dividend yield of 6.6%. Recently, the company has been subject to allegations of federal securities law violations, which as we all know today, leads to a flurry of class action suits. That the shares have sold off is one reason for the stock's attractive looking P/E and yield. Another name showing up is one I feel to be a quality opportunity: Oil driller Noble (NE) is currently yielding 5.6% and trading for 6x earnings.
Value Line also screens for "bargain basement stocks," which encompasses several proprietary metrics. Benchmark Electronics (BHE) provides electronic technology solutions worldwide. Shares trade for just over $22 valuing the company at $1.2 billion. Boasting a net cash position of $400 million, the balance sheet is pristine. The shares trade for below 10x earnings and 95% of book value. Benchmark clearly appears to be a very healthy business that one doesn't hear about in the news often.
Stock screens are excellent tools but investors should use them wisely. A low P/E stock today could mean that a company is on its way to generating fewer profits. Or it could mean a bargain. Either way, knowing how to use stock screens is the key to getting the most out of them.