The fundamental approach to investing offered by Benjamin Graham, Warren Buffett, and other value investors has been viewed in recent years as being outdated and largely eschewed in favor of Modern Portfolio Theory and its push away from stock-picking. However, the core truths that gave birth to stock analysis and Graham’s methods are still present, and judging companies by their book value and earnings can still result in strong returns.
So, here are five companies which offer up valuations that would make Graham happy. With strong P/B and P/E values, these stocks are being offered at a solid price for their balance sheets and assets.
Genon Energy (GEN)
GenOn is an electric utility supplying power to energy markets throughout the United States. As a generator, GenOn’s assets can produce up to 24,200 megawatts of electricity. It’s been a rough year for GenOn, with shares falling almost 45 percent in the last month. While growth projections for GenOn are less than stimulating, and the Debt/Equity ratio of 0.79 is disconcerting, GenOn does appear to have reached an attractive price at the very least. The company now features a P/B 0.34 and a P/E of 13.24, which might be enough to satisfy bargain shoppers looking for a company on the verge of a turnaround.
Lincoln National Corporation (LNC)
Lincoln National is a holding company that operates its insurance and retirement services through a variety of subsidiaries. Lincoln’s last year has been the tale of two halves, with the company losing over half its share value from early February to early October and then posting a turnaround and gaining almost 70 percent in the last four and a half months. The reason for the turnaround may lie, at least partially, in the company’s strong valuations. The P/B of 0.49 and P/E of 7.7 is just a start as Lincoln has bullish values for its PEG (0.73), P/S (0.68), P/C (1.51), and P/FCF (4.99).
ITT Corporation (ITT)
ITT is a diversified machinery company that made big waves this last October when it opted to spin-off its water and defense segments into Xylem (XYL) and Exelis (XLS). Since then, they company’s up about 12 percent with a strong bull run starting this January. ITT may be attracting investors with its relatively attractive share price. The company’s P/B is just 0.49, and its P/E is also attractive at just 3.30.
Chiquita Brands International (CQB)
Chiquita Brands is well-known to pretty much everyone, with its distinctive logo (which was, incidentally, created by cartoonist Dik Browne of Hagar the Horrible fame) and ubiquitous bananas. However, for those investors who may have passed over the fruit company, there’s ample reason to take a second look. Its P/B is only 0.49 and its P/E come in at 8.07, with most other price valuations showing that the company could be undervalued by the market right now. Chiquita has lost over 44 percent in the last year, potentially explaining why the price appears so low.
Protective Life Corp (PL)
Protective Life is another holding company that provides financial and insurance services through a variety of subsidiaries. Like most of the market, Protective declined for most of last year, losing steadily until early October when it staged a comeback and has been rising since. Protective life, despite its rally over the last four months, is still attractive priced according to its P/B of 0.54 and P/E of 7.09. Whether or not that makes it worth a buy only time will tell, but its fundamentals definitely appear strong.
