by Tim Melvin | November 4, 2013 6:00 am
To be honest, I don’t travel much. I am quite content to stay within the borders of Florida and sunshine these days. Still, my stock portfolio has a tendency to take trips all over the world.
Investing legend John Templeton introduced the world to the idea of an international search for value, while I personally learned the art from the late Chris Browne of Tweedy Browne.
And over the years, I have found that it makes a lot of sense, when searching for cheap stocks, to think globally. This is especially the case with the S&P 500 hitting new highs.
In fact, I have uncovered some spectacular bargains that paid off handsomely in recent decades — and continue searching far and wide for cheap stocks as a result.
Just last week I went around the world with a stock screener to see if any cheap and appealing stocks appeared. At the top of my international buy list right now is Canada-based MFC Industrial (MIL). MIL has also shown up on my screen for “perfect stocks” since it trades below book value, is profitable and pays a dividend.
MFC Industrial is in the commodity supply chain management business. Basically, if you need a commodity — from metals to lumber — MFC finds it and gets it delivered to your facility. MFC Industrial also engages in merchant-banking activities by investing in commodity-related companies that enhance their overall business.
All things commodity-related are cheap these days and MIL is no different. The Vancouver-based company currently trades at just 70% of book value and pays a 2.96% dividend. It won’t take much in the way of economic improvement to send earnings and the MIL stock price a lot higher … and I won’t be surprised if this company eventually becomes a growth stock leader in a global recovery.
Shipping stocks are well-represented on the list as well, as many of them entered the global slowdown with too many ships and too much debt on the books. We have seen some signs of a recovery this year, but shipping stocks are still very cheap.
One of the better-financed shipping companies is Bermuda-based Nordic American Tankers (NAT). NAT has a debt-to-equity ratio of just 0.25, unlike many of its highly levered competitors. The company owns 20 double hulled SuezMax size oil tankers and will benefit when global energy demand picks up.
NAT also pays a comfortable dividend that yields over 7.6% at the current price. It is likely to be a very bumpy ride since tankers are very sensitive to economic conditions. But with NAT shares trading at just 65% of book value, the stock is a solid bargain that could easily double over the next few years.
Taking the long view, I am very bullish on shipping stocks and Nordic American fits the bill as one of many cheap stocks worth owning for aggressive but patient investors.
The bottom line is that it is getting harder to find cheap stocks in the U.S. market. By expanding your search around the globe, you can find plenty of cheap stocks to round out your portfolio.
As of this writing, Tim Melvin was long MIL.
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