by Tim Melvin | February 27, 2014 9:11 am
Every three month or so, I like to sit down and take a look around the world to find cheap stocks based on assets. I look for large-capitalization stocks around the world that are easily tradable by U.S. investors are extremely cheap as measured by price-to-book value.
Buying large-cap cheap stocks around the world has been a very profitable technique for me. When I did this back in November, we came up with Korea Electric Power (KEP), AU Optronics (AUO) and Couer Mines (CDE). All of these cheap stocks have either matched or outperformed the broader market since then, and I expect they will continue to do so as they still trade below tangible book value.
When I ran the screen this morning, we turned up some very interesting new ideas. Credit Agricole S.A. (CRARY) is the third-largest bank in France and is a confederation of agricultural banks that own more than 40 regional banks around France as well as other financial services companies offering products like insurance, brokerage and asset management.
CRARY stock is currently trading at just 40% of tangible book value so, it certainly fits the “cheap stocks” criterion. Management just released their long-term plan that maps out how they intend to become the largest bank branch network in Europe by 2020. If they even come close to that goal, the upside in the stock for long term investors is tremendous.
Woori Finance (WF) is a Korean Bank that is currently trading at just 52% of tangible book value. In addition to basic banking services, it also offers things like merchant banking, consumer finance, private equity, insurance and investment services. And it has some of the best prospects among our list of cheap stocks.
The South Korean government just announced an aggressive program to spur the economy, including tax cuts for service industries like banking as well as reducing regulations over the sector. This should benefit the bank tremendously and could lead to much higher stock price over the next few years.
It should come as no surprise that a gold mining company makes the list of cheap stocks to buy. The precious metals market had a rough 2013 and is only now starting to show some signs of improvement. Iamgold (IAG) is a Canadian company that has five operating gold mines, a niobium mine, a diamond royalty, and exploration and development projects located in Africa and the Americas. The shares are currently trading at just 46% of book value and should do very well when the gold markets rebound at some point in the future.
I am no an expert on global macroeconomic conditions, and I have little-to-no idea when markets in countries like France and South Korea will improve. I have zero idea when gold will become back in fashion and make new highs again. But I am fairly certain that all of these markets will improve at some point in the next five years, and these very cheap stocks will see substantial improvement in their stock price.
As of this writing, Tim Melvin was long WF.
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