The hunt is on for the next undervalued stock pick that will pop once enough investors realize the market price is irrational. While this theory is grand to contemplate - that a stock will jump as soon as people come to their senses - the reality is that these picks often have valuation problems for a reason.
Still, if we can find companies increasing their net worth at a higher rate than share prices, there just might be a profitable pop if enough attention is driven their way or if earnings forecasts begin to rise.
How will we look for such undervalued picks?
- PE ratios below their 5 year averages
- Price to book ratio of 1 or less
- Book value growth vastly exceeding share price growth (or share price drop vastly exceeding book value decline)
Keep in mind that these could be highly contrarian stock picks where share price is
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LINEAR TECHNOLOGY LEXMARK INTERNATIONAL LEVEL 3 COMMUNICATIONS LAWSON SOFTWARE LAND SOFTWARE
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