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Rupert Hargreaves
Rupert Hargreaves
Articles (779)  | Author's Website |

2 Benjamin Graham Stocks Worthy of Further Research

Deep value stocks that conform to Graham's criteria

June 25, 2018 | About:

The current bull market has been going on for around 10 years and after this relentless rally, the number of value and deep value opportunities has dwindled to a modest amount.

However, there are still stocks out there that have some of the qualities of deep value investments.

To try and uncover these companies, I regularly conduct market screens to find out what's hidden away in the deepest corners of the market -- the dark corners and under rocks where value usually hides.

Management issues

G. Willi-Food International Ltd. (NASDAQ:WILC) was one of the stocks that appeared in my latest screen. This company, based out of Israel, is engaged directly and through subsidiaries, in the development, import, export, marketing and distribution of a range of over 600 food products around the world.

The stock immediately ticks many boxes for value. First of all, the shares are trading at a price-tangible book value of 0.8, a price-earnings ratio of 12 (on a historical basis) and an enterprise value-Ebitda ratio of 2.8.

For some comparison, the rest of the U.S. equity market is trading at a median EV/Ebitda ratio of 15.

What's more, G. Willi's balance sheet is strong with net cash of ILS 261 million reported within its last market update. The group has an enterprise value of $18.1 million and a market capitalization of $90.3 million.

So, what's not to like about this business? Well, for a start, over the past five years growth has been anemic. Revenue has barely budged, and net profit has grown at a compound annual rate of 0.8% since 2012. The group's operating margin has steadily declined from 8.2% in 2012 to 5.4% for 2017 and return on capital has decreased from 7% to 4%.

Still, book value growth, the preferred measure of value calculation for the late Martin Whitman (Trades, Portfolio), has averaged 4.5% per annum for the past five years, primarily thanks to G. Willi's steady cash flow and growing cash balance.

Aside from the mixed financials, the company is also facing some management issues. It recently lost its CEO, who offered the group his resignation at the end of November last year, and at the beginning of this month, the company had to fire its accountants.

The former CEO, Tim Cranko, only served with the company for four months before handing in his letter of resignation. The CEO who replaced him has already surpassed this target.

The big question is: Is G. Willi now cheap enough to make up for its management issue?


Another cheap stock that's currently showing up on my cheap stock screener is VOXX International (NASDAQ:VOXX).

VOXX looks to me to be an attractive turnaround opportunity. The company reported a net cash balance of $35 million at the end of fiscal 2018, with an enterprise value of $87.6 million and a market capitalization of $128 million.

What stands out about this stock is the fact that it is dirt cheap. It is currently trading at a price to tangible book value of 0.5 and a price-book value of 0.3.


VOXX is active in the automotive and consumer electronics space. It sold its Hirschmann Car Communication division last year to a subsidiary of TE Connectivity Ltd. for a total of $170 million, which is why the group's balance sheet is so strong today.

By eliminating expensive debt, which was costing the group as much as $6 million per annum in interest, Wall Street is expecting the firm to report a return to profitability this year with earnings per share of 38 cents predicted.

For the past few years, the company has been chronically loss-making, but it now looks as if this period is behind it. This should, in theory, justify a higher multiple and valuation for the shares.

If the company can meet profit forecasts for the year, then it's easy to justify a valuation of at least book value. It is certainly a stock worthy of further research based on its outlook and current valuation.

Disclosure: The author owns no stock mentioned.

About the author:

Rupert Hargreaves
Rupert is a committed value investor and regularly writes and invests following the principles set out by Benjamin Graham. He is the editor and co-owner of Hidden Value Stocks, a quarterly investment newsletter aimed at institutional investors.

Rupert holds qualifications from the Chartered Institute for Securities & Investment and the CFA Society of the UK. He covers everything value investing for ValueWalk and other sites on a freelance basis.

Visit Rupert Hargreaves's Website

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