One of the classic ratios that investors consider before investing in a stock is the price-to-book ratio, the measure of the stock price in relation to its book value -- in other words, the net worth of the company divided by the number of shares.
So if the company liquidated all assets, paid off all debts and divided up what was left by the number of shares, that would be the book value per share. Many times the book value is very conservative because real estate, which may have been owned for many years, can be carried on the books at cost.
The lower the price-to-book ratio, the better. Investors are looking for a price-to-book as close to 1 as possible (or even lower) as a factor when looking at all the appropriate metrics for a stock.
Stockpickr has reviewed the list of stocks held by Warren Buffett's Berkshire Hathaway and sorted out the stocks with the lowest price-to-book ratios into the
The Buffett stock with the lowest price-to-book is
, which is involved in three businesses: property and casualty insurance, furniture rental and steel. It has a price-to-book of 1.1. The company earlier this month reported a 3.8% increase in net earnings. The stock has a price-to-earnings (P/E) ratio of 32 and a yield of 0.4%.
Another low P/B-ratio Buffett stock is
, which has a price-to-book of 1.5. The company is planning a natural gas pipeline running from Alaska's North Slope to the U.S., which would reportedly be the largest pipeline in the world, at a cost of $42 billion. ConocoPhillips has a P/E of 12.4 , a P/E-to-growth (PEG) ratio of 0.8 and a yield of 2.1%.
ConocoPhillips is also a stock that's liked by money manager and
. Fisher, who manages $30 billion, also likes
, which has a price-to-book of 7.8,
, with a 7.8 P/B, and
, which has a 4.6 P/B.
Bank of America
, another Buffett stock, has a P/B of 1.5. BofA also has a P/E of 10, a PEG of 1.6 and a yield of 5.7%.
Bank of America is favored by another
columnist, the famous contrarian,
. The chairman of Dreman Value Management also likes
, which has a P/B ratio of 9.3,
, with a 1.1 P/B, and
, which has a 1.8 P/B.
To see all 10 of the Warren Buffett stocks with low price-to-book ratios, check out the
at Stockpickr.com. And for his entire stockholdings, be sure to visit the
At the time of publication, Altucher and/or his fund had no positions in stocks mentioned, although positions may change at any time.
James Altucher is president of Stockpickr LLC, a wholly owned subsidiary of TheStreet.com and part of its network of Web properties, and a managing partner at Formula Capital, an alternative asset management firm that runs a fund of hedge funds. He is also a weekly columnist for
The Financial Times
and the author of
Trade Like a Hedge Fund
Trade Like Warren Buffett
. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Altucher appreciates your feedback;
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