3 More Outrageously Cheap Stocks

With all of the recent volatility in the market, what stocks are outrageously cheap?

I found one recently, and I got to thinking about the others out there when I read money manager Bill Miller's comment that "the market abounds with good value." Of course, Mr. Miller also wrote last August that stocks were the cheapest they'd been since 1991 ... and after a brief rebound, they've gone right on dropping. Mr. Miller's fund has suffered thanks to core holdings in some recently falling stocks such as AES (NYSE: AES) and eBay (Nasdaq: EBAY).

Given wary financial markets, a recent rash of writedowns, and a slowing economy, it should be clear that not all stocks that look cheap are cheap (with no disrespect intended to the talented Mr. Miller). Both Warren Buffett and John Hussman have recently affirmed that lesson.

There are, however, some individual stocks today that, for one reason or another, not only present "good value," but are outrageously cheap.

Back up the truck, people
What makes for an outrageously cheap stock? Here's my short list:

1. A balance sheet with lots of cash and no debt.
2. An EV/EBITDA ratio of 6.0 or less.
3. A business with the financial strength and strategy to survive and thrive in a down economy.
4. No potential for massive writedowns.
5. A stock price that's been pummeled.

Of course, there's not a single American company with a market cap of more than $6 billion that meets those criteria, so if you're looking for an outrageously cheap stock, you may need to start thinking of yourself as a small-cap investor.

Welcome to the jungle
In truth, large caps such as Procter & Gamble (NYSE: PG) attract far too much investor attention to ever become inefficiently priced. That $210 billion consumer giant is tracked by 17 sell-side analysts.

You generally won't find as much interest among small caps, which is one of the reasons why -- given the criteria above -- Volcom (Nasdaq: VLCM), Horsehead Holding (Nasdaq: ZINC), and Miller Industries (NYSE: MLR) look outrageously cheap.

Data from Capital IQ as of Aug. 6, 2008.

Yes, that last subhead was a Guns N' Roses reference
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This article was first published on March 14, 2008. It has been updated.

Copyright © 2008 Universal Press Syndicate.