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The Most Undervalued Predictable Companies and Who Bought Them

Holly LaFon

Holly LaFon

249 followers
As the market soared this year, it lifted many stocks with it to prices unconscionable for value investors. However, against the 25% year-to-date gain for the S&P, some high quality companies appear undervalued based on DCF calculations due to temporary business setbacks, or other causes worth investigating. These discounted situations of course attracted the attention of some gurus.

Below are the most undervalued companies as the year 2013 draws to a close.

1. World Acceptance Corporation (WRLD)

World Acceptance Corporation is a five-star predictable company priced at $85.50 per share, which is an 80% discount to a DCF analysis valuation of $435 per share. The Peter Lynch chart also indicates that World Acceptance is undervalued:

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The company’s stock price has risen almost 15% this year, and 353% over the last five years. The $1.01 billion market cap company that finances small consumer loans in the U.S. and Mexico.

World Acceptance Corporation had an annual average earnings growth of 19.50% over the past 10 years. Its P/E at 10.4 is close to a one-year low and its P/S at 1.8 is close to a three-year low. It has a 2.8 P/B ratio.

The company at Sept. 30 had cash of $14.5 billion, and liabilities of $517.98 million.

Several gurus scooped up World Acceptance shares in the past two quarters. Joel Greenblatt purchased 2,270 shares for 0.01% of his total assets, Steven Cohen purchased 6,984 shares and Jim Simons added 15,025 shares for a total of 45,225. Chuck Royce holds 3,000 shares. John Hussman, Columbia Wanger and Jeremy Grantham all reduced their positions in the third quarter.

2. Itau Unibanco Holding SA (ITUB)

Itau Unibanco Holding SA is a five-star predictable company with a share price of $13.30, representing a 78% discount to its DCF cash flow analysis valuation of $60 per share. It also appears undervalued by the Peter Lynch chart:

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This year the bank’s stock declined 11%, and it has a $63.23 billion market cap. Itau Unibanco Holding provides various financial products and services in Brazil.

Itau Unibanco has a P/E ratio of 8.80 and P/S ratio of 1.00. Its P/B ratio is close to a five-year low at 1.91. The dividend yield of Itau Unibanco Holding is 0.60%. It had an annual average earnings growth of 23.50% over the past 10 years.

In the third quarter, David Dreman and Jeremy Grantham increased their holdings by 17.7% and 5.04% respectively, to hold 473,925 and 8,669,241 shares, respectively. Charles de Vaulx, IVA International Fund and Pioneer Investments all reduced their holdings. Howard Marks and Jim Simons exited their positions completely.

3. Lassonde Industries (TSX:LAS)

This five-star predictable company has a share price near a 10-year high at $101.60, at a 62% discount to its DCF fair value of $303 per share. The Peter Lynch chart sees it as slightly overvalued at this point:

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The company’s stock has traded up 34% this year, and 211% over the past five years.

Lassonde Industries Inc. was incorporated pursuant to the Canada Business Corporations Act on Sept. 3, 1981. Lassonde Industries has a market cap of $709.973 million; its shares were traded with a P/E ratio of 15.60, P/S ratio near a two-year high of 0.69 and P/B ratio near a 10-year high at 2.24.

The dividend yield of Lassonde Industries stocks is 1.46%. Lassonde had an annual average earnings growth of 15.50% over the past 10 years.

The Mawer New Canada Fund started a position in the company in the second quarter, buying 7,170 shares at 0.07% of their assets managed.

4. Credit Acceptance Corporation (CACC)

Credit Acceptance Corporation’s predictability rank is five-star. Its share price of $125.83 is at a 62% discount to its DCF calculated fair value of $333. The company also appears undervalued according to the Peter Lynch chart:

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CACC stock gained almost 24% year to date, and 809% over the past five years, almost a 10-year high price.

Credit Acceptance Corporation is a financing company with a market cap of $2.89 billion. It has a P/E ratio of 12.4, P/B ratio of 4.1 and P/S ratio of 4.5, close to a five-year high. Credit Acceptance Corporation had an annual average earnings growth of 27.80% over the past 10 years.

Two gurus increased their shares of CACC in the third quarter: Joel Greenblatt by 28.9% to 2,966 shares and Steven Cohen by 3.22% to 2,467 shares. Jim Simons and Chuck Royce kept their holdings level, while Paul Tudor Jones sold out.

5. Creditcorp Ltd. (BAP)

Creditcorp Ltd. is a 4.5-star predictable stock trading at $128.92 per share – a 61% discount to the DCF calculated valuation of $331. The Peter Lynch chart says the company currently has a price slightly higher than its true worth:

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Creditcorp shares declined 12% year to date, and gained 196% over the past five years.

Credicorp Ltd. is a financial services holding company in Peru, with four subsidiaries. It has a market cap of $10.28 billion, with a P/E ratio of 16.30 and P/S ratio of 2.80. Its P/B ratio is 2.5, close to a three-year low. The dividend yield of Credicorp stocks is 2% and an annual average earnings growth of 19.30% over the past 10 years.

Four gurus in the third quarter established new positions in Credicorp: Louis Moore Bacon, Steven Cohen, George Soros and Pioneer Investments. The largest position was taken by George Soros, with 54,035 shares. RS Investment Management increased its stake by 38.24% to 36,730 shares, and Ken Fisher increased his by 2.43% to 64,500. Jim Simons slashed his position by 84.54%, while Jeremy Grantham sold out.

To see more discounted predictable stocks, go to the Undervalued Predictable Companies screener.

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