Could a Nasdaq correction benefit these 8 value stocks?

​James Dennin, Kapitall: Value investors pick up shares during market corrections. Could Nasdaq's performance benefit these 9 value stocks?

Everyone's talking about the Nasdaq, which neared correction territory yesterday as it dipped below 4000 during midday trading.

A correction is when a stock, index, bond, or commodity declines 10% or more, and the most apparent catalyst is high valuations. In other words, they happen when investors stop buying stocks because the prices are too high. 

This is the value investor's time to shine.

Read more from Kapitall about top how to pick outperforming stocks from a value perspective. 

A market correction often creates cheaper prices throughout the stock market, regardless of individual companies' performance. So it's easier to find stocks whose fundamentals will support a higher stock price. 

Analysts have been expecting a correction all year. Markets usually adjust briefly any time the S&P 500 has a year where it returns 20% or more, and 2013's performance yielded over 30%. 

For all you value investors out there, we decided to run a screen on the Nasdaq for likely rebound candidates. To do that we started with companies that were still up for the month. This datum suggests that they were among the least likely to be affected by the Nasdaq's downturn. 

To narrow the screen further, we plugged that list of 200 stocks into a screener to see which ones were trading at least 15% below their Graham Number. This means that the stock is trading at a price which doesn't match the value of the company's assets. We limited the screen by removing financial stocks, which were already undervalued, and stocks with a market cap below $200 million.

That left us with 9 companies on our list. 

Click on the interactive chart to view data over time. 

 Will a Nasdaq correction benefit these 9 value stocks? Use the list below to begin your analysis. 

1. Handy & Harman Ltd. ( HNH): Engages in precious metals, tubing, and engineered materials businesses in the United States and internationally. Market cap at $280.50M, most recent closing price at $22.07.

Diluted TTM earnings per share at 3.17, and a MRQ book value per share value at 10.31, implies a Graham Number fair value = sqrt(22.5*3.17*10.31) = $27.12.

Based on the stock's price at $21.97, this implies a potential upside of 23.43% from current levels.  

 

 

2. Hallador Energy Company ( HNRG): Engages in the production and sale of steam coal in the United States. Market cap at $245.96M, most recent closing price at $8.71.

Diluted TTM earnings per share at 0.8, and a MRQ book value per share value at 6.38, implies a Graham Number fair value = sqrt(22.5*0.8*6.38) = $10.72.

Based on the stock's price at $8.51, this implies a potential upside of 25.93% from current levels.  

 

 

3. John B Sanfilippo & Son Inc. ( JBSS): Engages in processing and marketing tree nuts and peanuts in the United States. Market cap at $254.24M, most recent closing price at $23.34.

Diluted TTM earnings per share at 1.98, and a MRQ book value per share value at 19.62, implies a Graham Number fair value = sqrt(22.5*1.98*19.62) = $29.56.

Based on the stock's price at $22.84, this implies a potential upside of 29.44% from current levels.  

 

 

4. Kaiser Aluminum Corporation ( KALU): Produces and sells semi-fabricated specialty aluminum products primarily in the United States and Canada. Market cap at $1.31B, most recent closing price at $72.60.

Diluted TTM earnings per share at 5.44, and a MRQ book value per share value at 60.22, implies a Graham Number fair value = sqrt(22.5*5.44*60.22) = $85.85.

Based on the stock's price at $72.52, this implies a potential upside of 18.39% from current levels.  

 

 

5. Perry Ellis International Inc. ( PERY): Engages in designing, sourcing, marketing, and licensing apparel products for men and women in the United States and internationally. Market cap at $206.84M, most recent closing price at $13.97.

Diluted TTM earnings per share at 0.65, and a MRQ book value per share value at 25.08, implies a Graham Number fair value = sqrt(22.5*0.65*25.08) = $19.15.

Based on the stock's price at $14.37, this implies a potential upside of 33.28% from current levels. 

 

 

6. Rent-A-Center Inc. ( RCII): Engages in leasing household durable goods to customers on a rent-to-own basis. Market cap at $1.38B, most recent closing price at $27.11.

Diluted TTM earnings per share at 2.32, and a MRQ book value per share value at 25.48, implies a Graham Number fair value = sqrt(22.5*2.32*25.48) = $36.47.

Based on the stock's price at $26.41, this implies a potential upside of 38.09% from current levels.  

 

 

7. Staples, Inc. ( SPLS): Operates as an office products company. Market cap at $7.78B, most recent closing price at $12.19.

Diluted TTM earnings per share at 0.94, and a MRQ book value per share value at 9.39, implies a Graham Number fair value = sqrt(22.5*0.94*9.39) = $14.09.

Based on the stock's price at $12.16, this implies a potential upside of 15.89% from current levels.  

 

 

8. Sequenom Inc. ( SQNM): Provides products, services, diagnostic testing, applications, and genetic analysis products that translate the results of genomic science into solutions for biomedical research, translational research, molecular medicine applications, and agricultural and livestock research. Market cap at $288.41M, most recent closing price at $2.52.

Diluted TTM earnings per share at -0.93, and a MRQ book value per share value at -0.4, implies a Graham Number fair value = sqrt(22.5*-0.93*-0.4) = $2.89.

Based on the stock's price at $2.41, this implies a potential upside of 20.05% from current levels.

 

(List compiled by James Dennin, a Kapitall Writer. Monthly returns sourced from Zacks Investment Research, all other data sourced from Finivz.)

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