The stock market has been on a tear for over six years and, for the most part, equities are fairly valued. In some spots, a.k.a. technology, we have some rather rich valuations. But also in some spots, we still have some interestingly attractive valuations.
Kindred Biosciences (KIN) , a biotech focusing on animal health care, is one such business. I've written several times on KIN so I'm not going to repeat the merits of investment except to say the investment case remains intact. I chose Kindred to be part of my annual Value Portfolio. Although shares are up over 50% so far this year, the stock is still very attractively priced. The current price of $5.40 per share equates to a market capitalization of $105 million. The balance sheet carries zero debt and over $60 million in cash. Net equity stands at $67 million, so for less than $40 million, you are getting a business with a deep pipeline of potentially successful drug candidates.
General Motors (GM) may go down as the most obvious bargain sitting in plain sight. Mr. Market is generally right, but I believe this time, he is completely wrong. At $32 a share, GM is trading at an unheard-of 4x earnings. And most analysts agree that future profits will indeed grow from here. GM is free of its past legacy issues as a result of its emergence from bankruptcy -- no pension problems and a sound balance sheet. The argument that self-driving cars are a killer is being overstated. That being said, GM has the balance sheet to continue innovating and being a leader in automotive technology. If that were not enough, the company pays you a 5% dividend yield to boot. GM may be "too cheap not to own."
Over the next couple of years, I believe that value will prove to be a very strong catalyst in generating above-average investment returns from the above businesses for patient investors.