Benjamin Graham believed buying stocks at a deep discount to the value of their assets was a great way to achieve reduced risk and profits in the long run.
When Graham was investing in the first few decades of the 1900s, finding these companies was relatively straightforward, although it certainly wasn't easy. There were plenty of undervalued stocks on the market because it was difficult to find financial information. But, for those who were willing to put in the leg work, the opportunities were there.
Today, thanks to the dissemination of financial information, these opportunities are few and far between. However, there do seem to be a few options on the market today. Below are three companies that appear to conform to Graham's rules on value investing from my viewpoint. However, I should point out that I have done limited research on these opportunities, and the information below should only be considered to be a starting point for further investigation.
Rubicon Technology
The first company on my list of bargain stocks is Rubicon Technology, Inc (RBCN, Financial). This is a vertically integrated electronic materials provider specializing in monocrystalline sapphire for applications in light-emitting diodes (LEDs), optical systems and specialty electronic devices.
Combing through the company's financials, the first thing that sticks out is that it has more cash than its current market capitalization. With a market capitalization of $24.2 million at the time of writing and a net cash balance of $25.9 million, the firm has a negative enterprise value of $1.7 million.
Overall, based on its most recently reported financial figures, the stock has a book value per share of $12.40. That's compared to the current stock price of $9.90. This gives a price to book value of 0.8.
Unfortunately, the company is unprofitable. It is also cash flow negative, so it appears to be losing value as time goes on. Investors could benefit if the company manages to achieve profitability.
Nuwellis Inc
The second company that has appeared on my radar is Nuwellis Inc (NUWE, Financial). This medical device manufacturer produces the Aquadex SmartFlow system. This system is a unique method of removing excess fluid.
The company has been treading water for the past five years, but sales are finally starting to pick up. Revenue for the first quarter ended March 31, 2021 was $1.9 million, an increase of 18% compared to the prior-year period.
On top of this growth, the company also recently raised $18.9 million after expenses. It ended the first quarter with $27.9 million in cash and no debt. That's compared to the current market capitalization of $25.3 million.
The company has a negative enterprise value of around $2.6 million. The book value per share based on its most recent financial statements is $4.70. That's compared to the current share price of $3.90. In summary, it looks as if this is a cheap stock with growing revenues.
Nova Lifestyle Inc
Nova Lifestyle Inc (NVFY, Financial) reported its results for the first quarter of 2021 in the middle of May. The company reported a 51% increase in sales to $3.3 million. The net loss from continuing operations was $763,537 compared to a loss of $1.01 million in the same period of 2020.
These numbers imply the company is on track to significantly reduce its overall losses for 2021. Last year, Nova lost $26 million.
It has plenty of cash on hand to fund its recovery. The furniture manufacturer ended 2020 with $8.6 million of cash on the balance sheet. In addition, the overall book value per share at the end of the period was $7.31. That's compared to the current share price of $2.81.
A lot of value is tied up in inventory. The company had net short-term creditors of $41 million at the end of the year. This may mean the overall book value is a bit harder to determine.
Graham liked to mark down the value of inventory to reflect the uncertainty of selling prices. That's something value investors might want to keep in mind.
Disclosure: The author owns no share mentioned.
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