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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

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 ChartFSLR 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.

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,912.11 -70.48 -0.42%
S&P 500 1,969.95 -8.96 -0.45%
NASDAQ 4,442.6980 -2.2110 -0.05%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs