This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

More Two-Cent Pennies

NEW YORK ( TheStreet) - In a column on Wednesday, I reviewed the one-year performance of a group of stocks that were trading below tangible book value per share at this time last year.

While I have referred to them as "two-cent pennies," that's not to suggest that they are worth twice their current price. The "two-cent penny" reference is simply a metaphor for an asset that may be worth more than its current market value, and it was derived from my discovery that pennies now in circulation that were minted prior to 1982 actually contain 2.12 cents worth of copper and zinc. Those pennies are there for the taking, and I'm surprised to still find so many in my change. Likewise, stocks trading below tangible book value are also there for the taking, although they are bit harder to find these days than copper pennies.

The theory here is that stocks trading below tangible book value can be very cheap, and ultimately, the market will recognize their value, and price them accordingly. It doesn't always happen that way, especially when companies are in distress. To that end, my search has some built-in parameters that attempt to limit the inclusion of the most troubled companies, where tangible book values may not be a true representation of reality.

The screen includes the following criteria:
  • Market cap greater than $500 million
  • Price to tangible book value below 1
  • All sectors but financials
  • Long-term debt to equity ratio below 50%
  • Positive earnings in trailing 12 months

It's slim pickings this year, as just four companies made the cut this time around, versus 11 at this time last year. There is just one holdover from last year's search, oil-services company Rowan (RDC), which is trading at about the same price it did one year ago. It trades at 0 .98 times tangible book value, and 11 times the 2014 consensus earnings estimate.

First Solar (FSLR) also made the cut. The company trades at 0.92 times tangible book value, and was a surprising name on the list. It has nearly $1.3 billion, or $14.40 per share, in cash and short-term investments on the books, and just $256 million in debt.

It is not the type of company I'd typically look at; the word "solar" usually scares me away, but I am intrigued enough to at least dig a little deeper. The stock has come down a long way from the $300+ it briefly traded at back in 2008, and now trades at less than 12 times 2014 consensus estimates. FSLR Chart FSLR data by YCharts

Rounding out the list of qualifying companies are Coeur Mining (CDE) and oil and gas company LinnCo (LNCO). Certainly very slim pickings, and not much to be excited about. But that's how it goes at times in value investing.

At the time of publication, the author had no position in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
At the time of publication, Heller was long XXXX.

Jonathan Heller, CFA, is president of KEJ Financial Advisors, his fee-only financial planning company. Jon spent 17 years at Bloomberg Financial Markets in various roles, from 1989 until 2005. He ran Bloomberg's Equity Fundamental Research Department from 1994 until 1998, when he assumed responsibility for Bloomberg's Equity Data Research Department. In 2001, he joined Bloomberg's Publishing group as senior markets editor and writer for Bloomberg Personal Finance Magazine, and an associate editor and contributor for Bloomberg Markets Magazine. In 2005, he joined SEI Investments as director of investment communications within SEI's Investment Management Unit.

Jon is also the founder of the Cheap Stocks Web site, a site dedicated to deep-value investing. He has an undergraduate degree from Grove City College and an MBA from Rider University, where he has also served on the adjunct faculty; he is also a CFA charter holder.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $94.30 -0.92%
FB $118.08 0.55%
GOOG $695.81 0.50%
YHOO $35.97 -0.11%
TSLA $234.96 1.10%


Chart of I:DJI
DOW 17,651.26 -99.65 -0.56%
S&P 500 2,051.12 -12.25 -0.59%
NASDAQ 4,725.6390 -37.5850 -0.79%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs