James Barrow (Trades, Portfolio) is executive director of Dallas-based investment firm Barrow, Hanley, Mewhinney & Strauss, the lead portfolio manager for the Vanguard Windsor II and Selected Value Funds. He graduated from the University of South Carolina. For the 10-year period ended March 31, 2010, the Selected Value Funds averaged 9.33% a year, while the market had negative returns. He manages a portfolio comprised of 324 stocks with a total value of $73,425 million. The following are the top five stocks trading with the highest margin of safety and at very cheap P/E ratio.
L.B. Foster Co. (FSTR)
The company manufactures and distributes products and services for the rail, construction, energy and utility markets. The company classifies its activities into three business segments; Rail Products, Construction Products, and Tubular Products.
FSTR is trading at about $15 with a trailing 12-month P/E multiple of 5.98 and an estimated forward P/E multiple of 6.10. Over the last 10 years, the stock has risen by 7%, and during the last 52 weeks the price has been as high as $54.41 and as low as $14.09.
The DCF model gives a fair value of $63.26 that puts the stock as undervalued with a margin of safety of 77% at current prices. The Peter Lynch earnings line suggests a smaller margin of safety, giving a fair price of $37.0.
During the last quarter sales increased by 2.7%, compared to the prior year quarter due to a 99.7% increase in Tubular and Energy Services segment; gross profit margin improved to 21.6% and this increase was due to improved Rail and Construction segment margins, partially offset by reduced Tubular segment margins. These results for the quarter reflect the significant acquisition activity that the company has engaged during the fourth quarter of 2014 and first quarter of 2015.
Chuck Royce (Trades, Portfolio) is the main guru holding FSTR with 1,437,378 shares, that is 13.82% of shares outstanding, or 0.21% of total assets of his portfolio. John Keeley (Trades, Portfolio) is second with 07.43 % of shares outstanding, followed by Richard Snow (Trades, Portfolio) with 1.18%.
Copa Holdings SA (CPA)
The company is a Latin American provider of airline passenger and cargo service through its two main operating subsidiaries, Copa Airlines and Copa Colombia. It operates from its strategically located position in the Republic of Panama, and Copa Colombia provides service within Colombia and international flights from various cities in Colombia to Panama, Venezuela, Ecuador, México, Cuba, Guatemala and Costa Rica.
CPA is trading at about $44 with a trailing 12-month P/E multiple of 12.00 and an estimated forward P/E multiple of 5.15. Over the last 10 years, the stock has risen by 86%, and during the last 52 weeks the price has been as high as $126.70 and as low as $3.00.
The DCF model gives a fair value of $100.19 that puts the stock as undervalued and with a margin of safety of 55% at current prices. The Peter Lynch earnings line suggests a fair price of $84.7.
For 2Q15 the company reported a 64.7% decrease over adjusted net income of 2Q14 and operating income had a decrease of 62.5 over 2Q14. These weak results reflect lower passenger yields, driven in large part by the reduction in Venezuelan yields from the transition to all US dollar ticket sales, as well as further demand weakness, mainly in Venezuela, Brazil and Colombia. Operating margin for the second quarter was 9.1%, compared to 19.5% in 2Q14 and the company expect an operating margin in the range of 11% to 13% for 2015.
Charles Brandes (Trades, Portfolio) is the main guru holding CPA with 1,330,067 shares, that is 3.03% of shares outstanding or 1.48% of total assets of his portfolio. NWQ Managers (Trades, Portfolio) is second with 1.27% of shares outstanding, followed by James Barrow (Trades, Portfolio) with a small stake of 0.01%.
EnerSys (ENS)
The company is a manufacturer, marketer and distributor of industrial batteries. It also manufactures, markets and distributes related products such as chargers, power equipment and battery accessories, and it provides related after-market and customer-support services for industrial batteries.
ENS is trading at about $52 with a trailing 12-month P/E multiple of 14.00 and an estimated forward P/E multiple of 11.79. Over the last 10 years, the stock has risen by 294%, and during the last 52 weeks has been as high as $73.27 and as low as $49.21.
The DCF model gives a fair value of $108.18 that puts the stock as undervalued with a margin of safety of 51% at current prices. By contrast, the Peter Lynch earnings line says the company is currently fairly priced, giving a fair price of $56.7.
Adjusted earnings per share was an all-time record for any second quarter in the history of the company and in the last quarter it was $1.06, which exceeded the guidance of $1 to $1.04 per share and the third quarter guidance for non-GAAP adjusted net earnings per diluted share is $1.04 to $1.08.
Chuck Royce (Trades, Portfolio) is the main guru holding ENS with 920,810 shares, that is 1.99% of shares outstanding, or 0.27% of total assets of his portfolio. NWQ Managers (Trades, Portfolio) is second with 1.54% of shares outstanding, followed by David Dreman (Trades, Portfolio) with 0.25%.
Travelers Companies Inc. (TRV)
The company through its subsidiaries provides commercial and personal property and casualty insurance products and services to businesses, government units, associations and individuals. The company's business segments are Business and International Insurance, Bond & Specialty Insurance and Personal Insurance.
TRV is trading at about $100 with a trailing 12-month P/E multiple of 9.10 and an estimated forward P/E multiple of 10.57. Over the last 10 years, the stock has risen by 131%, and during the last 52 weeks has been as high as $110.49 and as low as $90.83.
The DCF model gives a fair value of $200.36 that puts the stock as undervalued with a margin of safety of 50% at current prices. Even the Peter Lynch earnings line put the stock as undervalued but with a smaller margin of safety since it suggests a fair price of $160.
During the last quarter as a result of lower catastrophe losses and a $32 million benefit from the resolution of prior year tax matters, net income and operating income were up 19% and 20%, respectively, from prior year quarter.
Pioneer Investments (Trades, Portfolio) is the main hedge fund holdingTRV with 1,016,202 shares, that is 0.33% of shares outstanding, or 0.37% of total assets of his portfolio. James Barrow (Trades, Portfolio) is the second with 0.28% of shares outstanding, followed by Jim Simons (Trades, Portfolio) with 0.22%.
CA Inc. (CA)
It is a provider of enterprise information technology (IT) software and solution. It develops and delivers software and services that help organizations manage and secure their IT infrastructures and deliver more flexible IT services. The company organizes its offerings into three operating segments namely Mainframe Solutions, Enterprise Solutions and Services operating segments.
CA is trading at about $28 with a trailing 12-month P/E multiple of 14.60 and an estimated forward P/E multiple of 11.49. Over the last 10 years, the stock did not face any change and during the last 52 weeks has been as high as $33.42 and as low as $25.16.
The DCF model gives a fair value of $51.81 that puts the stock as undervalued and with a margin of safety of 46% at current prices. The Peter Lynch earnings line says the company is currently fairly valued giving a fair price of $27.4.
James Barrow (Trades, Portfolio) is the main guru holding CA with 8,727,043 shares, that is 1.98% of shares outstanding or 0.35% of total assets of his portfolio. Brian Rogers is second with 0.68% of shares outstanding, followed by Joel Greenblatt (Trades, Portfolio) with 0.52%.
Summary :
| Ticker | P/E | Margin of safety (DCF) |
| FSTR | 5.98 | 77% |
| CPA | 12.00 | 55% |
| ENS | 14.00 | 51% |
| TRV | 9.10 | 50% |
| CA | 14.60 | 46% |
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