This Day On The Street
Continue to site
ADVERTISEMENT
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

Deal Or No Deal: 5 Stocks Under 6 Dollars Trading Below Book Value

James Dennin, Kapitall: We screened stocks under 5 dollars using the Graham Number for all you value investors out there.

Stocks were slightly down this morning after a strong rally over the last week. Trading spiked in the S&P 500 as it seemed like a record five days of straight gains was drawing to a close. Part of the problem today stems from lukewarm earnings reports from major firms like Caterpillar (CAT)

[Read more about deals under $5 from Kapitall here.

Considering the volatility in the markets over the last month or so, we decided to run a screen for growth stocks that might make good value investments.

Value investors often look for stocks that are trading down after bad news causes a temporary deflation in the stock price. Value investments are typically stocks expected to rise in fair value, and there are numerous ways to determine whether a stock will go up.

One way to do so is by determining the stock's Graham Number.

Benjamin Graham was one of Wall St.'s greatest thinkers. After graduating from Columbia University, at the age of 20, he had offers to join the college from three different departments: English, Mathematics, and Philsosophy. However he decided to take a job on Wall Street where he excelled. Graham believed in studying a company's balance sheet to find an "intrinsic value," and only investing if that value was higher than the current price. 

Things have gotten a lot easier since Benjamin Graham's day. We now have a measurement for the so-called "intrinsic value" of a stock. And while it's a rough approximation, it is still built using Graham's favorite parameters: book value per share (BVPS), earnings per share (EPS), and the price to equity ratio (P/E).

To calculate a stock's Graham number we use the following formula:

Graham Number = Square Root of [ (22.5) x (Earnings Per Share) x (Book Value Per Share) ].

It's important to remember however that the Graham Number is still an estimate. Book value per share looks at a company's revenue, debt, and costs to determine something close to a "fair value," but you should never invest in a stock based on this number alone.

1 of 3

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
Options Profits

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

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

DOW 18,010.68 -115.44 -0.64%
S&P 500 2,107.39 -13.40 -0.63%
NASDAQ 5,070.0260 -27.95 -0.55%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs