If you choose U.S. stocks that are trading below the Graham Number, which is an estimation of intrinsic value, you could have a higher likelihood to identify bargains.
The Graham Number is calculated as the square root of "earnings per share x book value per share x 22.5." Below are 3 stocks trading below their Graham Numbers.
UMB Financial Corp
The first stock that makes the cut is UMB Financial Corp (UMBF, Financial), a Kansas City, Missouri-based holder of UMB Bank, a regional bank that provides various banking and other financial services to individuals and companies.
The stock traded at a price of $61.13 per share at close on Wednesday, which is below the Graham Number of 70.97, for a price-to-Graham-Number ratio of 0.86.
The stock price has fallen 9% over the past year, determining a market capitalization of $2.94 billion and a 52-week range of $39.47 to $70.26.
GuruFocus has assigned a score of 4 out of 10 for both the company's financial strength and its profitability.
As of October, the stock has one strong buy recommendation rating, one buy recommendation rating and five hold recommendation ratings for an average price target of $65 per share on Wall Street.
In addition to UMB BANK N A/MO, whose stake accounts for 10.78% of shares outstanding, the other top fund investors include BlackRock Inc. with 10.35% and VANGUARD GROUP INC with 9.46%.
Support.com Inc
The second stock that makes the cut is Support.com Inc (SPRT, Financial), a Sunnyvale, California-based software application provider in the U.S.
The stock traded at a price of $2.18 per share at close on Wednesday, which is still below the Graham Number of 2.37, for a price-to-Graham-Number ratio of 0.92.
The stock price has risen 29% over the past year for a market capitalization of $41.59 million and fluctuating in a 52-week range of $0.93 to $2.45.
GuruFocus has assigned a score of 8 out of 10 for the company's financial strength and of 2 out of 10 for its profitability.
As of October, the stock has one recommendation rating of hold and a target price of $3 per share on Wall Street.
The company's top fund holder is Fondren Management LP with 6.82% of shares outstanding, followed by Jim Simons with 5.1% and VANGUARD GROUP INC with 4.68%.
Morgan Stanley
The third stock that makes the cut is Morgan Stanley (MS, Financial), the U.S. investment bank major.
The stock traded at a price of $51.43 per share at close on Wednesday, which is significantly below the Graham Number of 73.77, for a price-to-Graham-Number ratio of 0.70.
The share price has risen by 6% in the past year, fluctuating in a 52-week range of $27.20 to $57.57. The stock has a market capitalization of $93.05 billion.
GuruFocus has assigned a score of 3 out of 10 for the company's financial strength and of 5 out of 10 for its profitability.
As of October, the stock has three strong buy recommendation ratings, 14 buy recommendation ratings, nine hold recommendation ratings and only one sell recommendation rating. The average target price stands at $61.67 per share.
The company's top fund holder is MITSUBISHI UFJ FINANCIAL GROUP INC with 23.92% of shares outstanding, followed by STATE STREET CORP with 7.10% and VANGUARD GROUP INC with 6.26%.
Disclosure: I have no positions in any security mentioned in this article.
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