Friday, March 13, 2015

A “Smooth” Screen for Cheap Stocks

The concept of “smoothing” earnings is nothing new to value investors. Finding a company that has been thrown in the bargain bin after one or two bad years, with no regard for true (long-term) “earnings power,” has been the bread and butter of many great track records.

Yet, I’m surprised how often the “CAPE” ratio (cyclically adjusted price to earnings ratio), as it has come to be known, is applied to general market indexes while its application to individual stocks is largely ignored. This is somewhat ironic since, long before Professor Robert Shiller made the metric famous, Graham and Dodd were looking at the “average earnings” of individual stocks in their classic tome Security Analysis.

Now, admittedly, using a 10-year average P/E on raw data comes with a whole host of problems/issues, not the least of which are:
  • A company with rapidly growing earnings may have an unfairly high CAPE (i.e. its earnings from 5-10 years ago may be incredibly small, and not representative of its current earnings power).
  • A company with rapidly declining earnings may have an unfairly low CAPE (i.e. its earnings from 5-10 years ago may be too high and not representative of its current earnings power).
Yet, I would argue that most fundamental investors would want this type of “messy” data - an idea screen where there a lot of false positives, and where analytical ability can be used to pick diamonds in the rough (or is it nickels in front of bulldozers?). 

So, with that background, I decided to run a screen to find the stocks with the lowest current CAPE ratios. My criteria:
  • All data is from Bloomberg as of March 12, 2015
  • CAPE is defined as: Current Price / 10 Year Average Diluted EPS
    • Note: Diluted EPS does not adjust out discontinued operations. This (good or bad) adds to the “messiness” of the data.
  • Minimum market cap: $15 million
  • Stocks traded on a U.S. exchange and domiciled in the U.S.

As usual, I have not scrubbed the data. There may be incredible inaccuracies. Please do your own research and due diligence.

Without further delay, what follows is a listing of the 100 cheapest U.S. stocks based on a 10 year CAPE.  Happy hunting!

Cheapest 10 Year CAPE Securities as of March 12, 2015
RANK
COMPANY
TICKER
CAPE
MARKET CAP
1
RADIOSHACK CORP
RSHCQ
0.30
$18,629,942
2
YASHENG GROUP
HERB
0.85
$74,446,728
3
FIRST MARBLEHEAD
FMD
0.85
$72,064,624
4
ITT EDUCATIONAL
ESI
1.49
$175,393,152
5
LIGHTING SCIENCE
LSCG
1.53
$65,083,476
6
OTELCO INC-A
OTEL
1.64
$15,022,044
7
SPECTRUM GROUP
SPGZ
1.90
$16,890,048
8
MILLER ENERGY RE
MILL
1.99
$59,692,124
9
MMA CAPITAL MANA
MMAC
2.01
$67,262,992
10
DOVER DOWNS GAMI
DDE
2.91
$37,511,552
11
HANDY & HARMAN L
HNH
2.94
$466,910,592
12
ALASKA COMM SYS
ALSK
3.26
$86,199,224
13
WEIGHT WATCHERS
WTW
3.58
$554,638,784
14
CREXENDO INC
CXDO
3.69
$26,036,280
15
MCDERMOTT INTL
MDR
3.74
$755,999,040
16
ENZON PHARMACEUT
ENZN
4.04
$45,949,388
17
APPROACH RESOURC
AREX
4.08
$270,270,208
18
CIM COMMERCIAL T
CMCT
4.20
$1,727,194,240
19
QC HOLDINGS INC
QCCO
4.54
$34,603,476
20
DIAMOND OFFSHORE
DO
4.76
$3,749,623,552
21
AEROPOSTALE INC
ARO
4.78
$292,753,408
22
AMBASSADORS GRP
EPAX
4.81
$42,097,752
23
BOOKS-A-MILLION
BAMM
5.08
$38,678,260
24
GULFMARK OFFSHOR
GLF
5.56
$369,037,760
25
NATURAL RESOURCE
NRP
5.63
$913,579,712
26
HARVEST NATURAL
HNR
5.84
$22,372,442
27
TIDEWATER INC
TDW
5.93
$1,136,976,640
28
WEBCO INDS INC
WEBC
6.09
$57,836,000
29
EMERSON RADIO
MSN
6.13
$35,268,780
30
FULL HOUSE RESRT
FLL
6.13
$28,126,254
31
COMDISCO HOLDING
CDCO
6.19
$25,986,734
32
DAWSON GEOPHYSIC
DWSN
6.20
$103,464,000
33
BP PRUD BAY-RTU
BPT
6.24
$1,260,460,032
34
MARATHON OIL
MRO
6.28
$17,352,826,880
35
MITCHAM INDS
MIND
6.28
$65,133,060
36
NEW ULM TELECOM
NULM
6.42
$40,300,540
37
FIRST INTER/MT-A
FIBK
6.51
$1,235,635,328
38
INTL SHIPHOLDING
ISH
6.53
$95,034,152
39
CNB CORP
CNBW
6.62
$83,050,352
40
PEABODY ENERGY
BTU
6.64
$1,584,323,456
41
INTERNET PATENTS
PTNT
6.73
$17,683,220
42
CRESTWOOD EQUITY
CEQP
6.88
$1,154,074,624
43
CONTANGO OIL & G
MCF
7.03
$429,474,080
44
FRIEDMAN INDTRY
FRD
7.10
$43,651,752
45
ROWAN COMPANIE-A
RDC
7.11
$2,378,658,816
46
PROSPECT CAPITAL
PSEC
7.13
$3,064,334,080
47
ADDVANTAGE TECH
AEY
7.17
$23,486,380
48
US ENERGY CORP
USEG
7.17
$34,633,812
49
INCOME OPP RLTY
IOT
7.38
$29,594,320
50
SAN JUAN BASIN
SJT
7.48
$604,516,096
51
INSIGNIA SYSTEMS
ISIG
7.49
$35,639,948
52
KOSS CORP
KOSS
7.64
$17,054,050
53
CASH AMER INTL
CSH
7.68
$700,230,464
54
MVC CAPITAL INC
MVC
7.71
$221,352,512
55
DENBURY RESOURCE
DNR
7.77
$2,746,093,312
56
AMBASE CORP
ABCP
7.80
$87,586,168
57
NORTHEAST BANCRP
NBN
7.92
$82,408,760
58
ALLIANCE SEMICON
ALSC
8.05
$26,603,548
59
ITT CORP
ITT
8.07
$3,643,640,064
60
UNIT CORP
UNT
8.11
$1,320,100,864
61
ANNALY CAPITAL M
NLY
8.16
$9,837,822,976
62
GUESS? INC
GES
8.30
$1,506,866,688
63
NL INDUSTRIES
NL
8.37
$347,595,776
64
INTERSECTIONS IN
INTX
8.39
$66,432,296
65
YUMA ENERGY INC
YUMA
8.40
$95,723,688
66
SERVOTRONICS INC
SVT
8.42
$15,312,430
67
COMSTOCK RES INC
CRK
8.43
$218,129,632
68
ATWOOD OCEANICS
ATW
8.50
$1,846,573,696
69
EMPIRE RESOURCES
ERS
8.62
$40,482,800
70
SCHNITZER STEEL
SCHN
8.84
$441,139,712
71
HORNBECK OFFSHOR
HOS
8.88
$693,716,864
72
EZCORP INC-A
EZPW
8.91
$578,700,544
73
ABERCROMBIE & FI
ANF
8.91
$1,462,987,520
74
JPS INDUSTRIES
JPST
8.96
$99,746,984
75
GEOSPACE TECHNOL
GEOS
9.09
$222,042,960
76
BRINK'S CO/THE
BCO
9.10
$1,302,278,272
77
APOLLO EDUCATION
APOL
9.11
$2,914,203,648
78
ACRE REALTY INVE
AIII
9.16
$27,079,310
79
US GLOBAL INV-A
GROW
9.19
$46,531,976
80
AVON PRODUCTS
AVP
9.39
$3,628,035,584
81
JOY GLOBAL INC
JOY
9.39
$3,851,165,952
82
MURPHY OIL CORP
MUR
9.46
$8,305,296,896
83
PATTERSON-UTI
PTEN
9.47
$2,538,122,240
84
EDUCATIONAL DEV
EDUC
9.59
$16,854,016
85
PARKER DRILLING
PKD
9.62
$362,480,576
86
OIL STATES INTL
OIS
9.65
$2,127,773,312
87
MESABI TRUST
MSB
9.73
$225,654,992
88
CAPSTEAD MORTGAG
CMO
9.76
$1,118,605,696
89
REPUBLIC BNCRP-A
RBCAA
9.84
$495,420,800
90
NATL PRESTO INDS
NPK
9.88
$401,178,720
91
VISKASE COS I
VKSC
9.89
$207,551,872
92
GRAFTECH INTL
GTI
9.97
$532,219,360
93
DYNEX CAPITAL
DX
10.21
$448,844,896
94
ARES CAPITAL COR
ARCC
10.23
$5,264,451,072
95
WINDSTREAM HOLDI
WIN
10.23
$4,676,486,656
96
GENCOR INDS INC
GENC
10.23
$92,623,472
97
RESOURCE CAPITAL
RSO
10.27
$612,742,720
98
AMPCO-PITTSBURGH
AP
10.33
$178,801,184
99
VALUE LINE INC
VALU
10.39
$153,571,392
100
OCWEN FINL CORP
OCN
10.52
$1,181,401,088

Disclosure:  Author may hold a position in securities listed in the table.


Harvest Investor © 2015. All rights reserved. The content and ideas contained in this blog represents only the opinions of the author. The content in no way constitutes investment advice, and should never be relied on in making an investment decision, ever. No content shall be construed as a recommendation to buy or sell any security or financial instrument, or to participate in any particular trading or investment strategy. The author may hold positions in the securities and companies mentioned on this site. Any position disclosed on this site may be modified or reversed without notice to you. The content herein is intended solely for the entertainment of the reader, and the author.

1 comment:

Safety in Value said...

This is a great list! Thanks for posting it, I see lots of value names I'm familiar with, so I'm excited to work through the rest of it!