Value Investing 101: Kroger

From STOCK PICKS: Top 5 All-Around for Oct. 28:

Hewlett-Packard (HPQ Quote) provides products, technologies, solutions and services to individual consumers and businesses worldwide. Our buy rating for Hewlett-Packard has not changed since November 2004, based on the company's impressive record of earnings per share growth, increases in net income and revenue, attractive valuation levels, and good cash flow from operations.

Hewlett-Packard's total revenue for the third quarter of fiscal 2008 grew 10.5% year over year, which allowed EPS to improve by 21.2% compared with a year ago. The company has, in fact, demonstrated a pattern of positive EPS growth over the past two years, and we feel that this trend should continue. Net income increased by 14%, rising from $1.8 billion in the third quarter of fiscal 2007 to $2.03 billion in the most recent quarter.

Read the full version of STOCK PICKS: Top 5 All-Around for Oct. 28.

Pactiv's Not Attractive (Video, Oct. 23)

Value Investor portfolio manager David Peltier explains why packaging maker Pactiv (PTV Quote) isn't worth wrapping up and sticking in your portfolio despite lower materials costs.

To watch the video, click the player below:

From Three Good Companies for Next to Nothing:

It's official: The general investing public truly hates the stock market. How else can you explain the absurdity surrounding some valuations today? And no, I [Sham Gad] am not talking about low price-to-earnings or low price-to-book ratios, although they are fine metrics to lean on.

Instead, I am referring to businesses that have gone beyond low earnings valuations and have gotten to where they trade near net cash on the balance sheet. In other words, the market is giving you the businesses for next to nothing.

While I certainly believe that many businesses will be earning record profits four or five years from now, we need to consider the situation at hand. And the reality is that profits are likely to contract in the near term.

I'm always looking for a margin of safety, and in this environment I like to look at average profits and cash flows for the last four or five years to get a more accurate picture of the numbers for next year.

Worth a closer look is KHD Humboldt Wedag (KHD Quote), an industrial engineering supply company. The company basically provides know-how in building and designing cement and coal and mineral plants all over the world. Today [Oct. 23] the stock trades at about $15, for a market cap of around $445 million. The company has a net cash position of $430 million, or about $14 a share.

Business still seems to be OK. The company earned 89 cents a share in the second quarter, but you should understand that it prospers from the growth in global infrastructure, which is likely going to slow down further. Nonetheless, the company continues to grow backlog, which stood around $1 billion at the end of June 2008. I don't depend on backlog in an environment where credit is all but gone to everyone except those who don't need it. Still, the company does business all over the world, and regions such as the Middle East have not been as severely hit.

Read the full version of Three Good Companies for Next to Nothing.