Recently, I constructed a screen on the GuruFocus All-in-One Screener, a Premium feature, using the stock selection process described by Benjamin Graham in his classic book "The Intelligent Investor." I as screening for those equities that are trading below book value, pay dividends of greater than 3% and which trade on the New York Stock Exchange. Here are three of the results from the screener that stood out to me.
Please note, this is just a first look at these stocks based on screening criteria; investors should conduct their own due diligence if they are interested in these stocks. Benjamin Graham had the long-term in mind when he wrote about stock selection, and it’s important to keep that in mind.
The footwear and accessories company is trading at a 9% discount to its book value and with a price-earnings ratio of 3.45. Earnings per share are up this year by 179.90%. The past five-year record shows an annual average increase of 11.80% for earnings. The price-sales ratio is a mere 0.33 and the price-to-free-cash-flow ratio is 8.38.
Footlocker’s shareholder equity greatly exceeds the amount of long-term debt on the books, which is good. The current ratio is a positive 1.40.
The short float is 6.89%, a bit on the high side and a sign that someone does not expect the growth to continue. The other side of this is that if those shorts are forced to cover at some point, that might fuel a decent rally.
Footlocker pays investors a dividend yield of 4.07%.
MDC Holdings (MCD)
This company is in the residential construction business, which might not be the best business to be in during a recessionary period. If the economy is headed into such a period, not that many new homes will be going up. On the other hand, if the U.S. Federal Reserve can somehow engineer a “soft landing” and much of the negative thinking is already priced in, maybe it’s worth considering.
This year’s earnings per share are up by 51.60%. The EPS growth rate for the past five years is 39.70%. Wall Street’s expectations for next year and the next few years are for much less growth than that.
It’s now trading at a 2% discount to its book value and with a down-in-the dumps price-earnings ratio of 4.61. The price-sales ratio is a low 0.51. The amount of long-term debt slightly exceeds shareholder equity.
MDC Holdings pays a 5.54% dividend yield. This might be tough to sustain if a recession finally kicks in and home construction slows.
This name-brand life insurance company can be purchased right now at just 68% of its book value. With a price-earnings ratio of 5.71 and a price -sales ratio of 0.61, it's clear to see that this stock fits the value profile.
This year’s earnings per share look good at 38.00% alongside a past five-year EPS growth rate of 15.00%.
With an average daily volume of 2.02 million shares, it’s liquid enough for large institutional investors to get involved. Hedge fund managers Ken Heebner (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) made large purchases of Prudential stock recently, according to SEC filings dated for the fourth quarter of 2021.
In another good sign, the equity recently hit a 13-year high price.
The company is paying investors a dividend yield of 4.33%.
