One of my favorite stock selection screens to run in my ongoing search for cheap stocks is to look for companies whose stock trades below book value and the fundamentals earn a Piotroksi F-score of 6 or higher.
The combination of low valuations and improving fundamental and financial factors has been a powerful one over the years, and has led to some big winners. In recent years as accounting practices and reporting have become more standardized around the globe I have found it to be equally useful in spotting international stocks that are cheap and poised for a strong recovery.
One company that meets our criteria is LG Display Company (LPL). The company makes thin film transistor liquid crystal display and other display panels for use in televisions, notebook computers, and desktop monitors. The South Korean company also makes smaller display screens of the smart phone and tablet computer market place.
LPL is displaying several new products the Consumer Electronics Show in Las Vegas this week, including the G Flex phone previously available only in South Korea. The stock currently trades at 86% of book value and the F-score is a 6. Earnings have been improving dramatically this year with profits up more than 100%, but the stock hasn’t moved yet. Pick it up now before everyone else does.
T.A.T. Technologies (TATT) is an Israeli company that provides products and services to the defense and aerospace industries. Products include heat exchangers, turbines, fuel component systems as a well as cooling and air conditioning systems for the aerospace industry. TATT also makes mobile cooling and air conditioning solutions for military applications, such as mobile command and control units, command and control vehicles, and mobile hospitals.
Earlier this year, private equity firm FIMI Opportunity acquired 53% of the company, which has a focus on increasing shareholder value for itself as well as outside shareholders. In the most recent quarter, TATT reported a triple-digit earnings increase and the stock price has been improving. TATT stock trades at just 82% of book value, and the F-score is a solid 8 indicating that the improvements in operating conditions and the stock price should continue well into 2014.
United Microelectronics (UMC) is a Taiwan-based semiconductor foundry company. It provides foundry services such as wafer manufacturing to semiconductor companies in Europe, Japan, Singapore, Taiwan, and the United States. UMC customers including leading chip companies such as Advanced Micro Devices (AMD) and Texas Instruments (TXN).
UMC is seeing signs of a turnaround with a 100% jump in year-over-year earnings last quarter, and the shares are still cheap. UMC stock trades at just 75% of book value while its fundamental and financial position earns it an F-score of 8. As the semiconductor markets continue to strengthen this year, UMC stock could lead the way higher.
The world has gotten considerably smaller since I started in the stock market game. Investors now have enough information, data and access to use deep value techniques to build a portfolio of safe, cheap international stocks.
As of this writing, Tim Melvin did not hold a position in any of the aforementioned securities.