as part of our
The following stocks carry significant cash on their balance
sheets and are also undervalued with other traditional valuation
valuation screen contains the following filters:
P/E below 10
P/B below 1
Cash/Price > 1
52 week price performance = bottom 20% of its industry
All these stocks sport a negative enterprise value.
Some of these stocks are distressed for a reason but the company
is very likely to navigate the circumstances and come out with a
stronger business. Investors should pay attention to the reason for
undervaluation and the potential that any value in these shares can
be quickly realized. With further due diligence, you can determine
if these stocks are worthy of taking a position in and appropriate
allocation in your portfolio.
Key Valuation Indicators as of Oct 8, 2012
Parke Bancorp (
A holding company for Parke Bank that provides banking services to
individuals and small businesses in parts of New Jersey and
Philadelphia, PA. The company trades at a -$41.40 m enterprise
value and below net cash. The company has grown its book value in
the last 3.5 years and has been profitable. The stock also sports
an attractive PEG ratio of 0.5, which may or may not be relevant
depending on how much stock you put in future earnings estimates (I
don't put too much).
Universal Insurance (
A Florida based Property and Casualty insurer, the company can be
bought in the market today at $239m enterprise value. If profitable
operations and continuous book value growth were not enough, the
stock also pays a dividend that currently yields 8.2%. Is the
dividend sustainable? I think it is. The company has substantially
cash on the books. Even though the insurance operations in Florida
has been week for the last few years, the company is taking steps
to reduce its costs as well as expand to other states outside
Maxygen is a bio-pharmaceutical company out of San Mateo California
working to help alleviate the effects of chemotherapy and acute
radiation syndrome. While a small bio-tech company can be risky, it
is worth noting that the company has 2.5x its market value as cash
on the books, and has no debt as of the last quarterly report.
Since then, the company has paid $100 million to the shareholder as
a special dividend. The stock continues to trade at a discount to
the cash that remains and can be attractive if the rest of the
assets are valuable.
Knight Capital (
Most of us are probably aware of Knight Capital and its big High
Frequency Trading boo-boo few months ago. Given that, it may be
wise to take the ttm earnings with a pinch of salt and assume.
Still, with the stock 80% down in the last 52 weeks, there is
enough value for the investor looking for blood in the streets. The
valuation goes like this: $7.5 B in cash, $5.2 B in debt and half a
billion in market value. Enterprise value = $2.07B. Do you think
the company will survive and be profitable again?
A high cash/low debt situation can yield
excellent stock buying opportunities
as the amount of cash on the books puts a floor on the stock price.
Just make sure to offset the cash assets with any corresponding
liabilities for the financial firms (such as deposits, or unearned