These Stock Prices Are Incredibly Irrational... and Dirt Cheap

[] If you look under enough rocks, you’ll find value stocks. The problem is that most people don’t know where to look, let alone even where to start. [View in browser]( [View in browser]( [] [Godesburg's Haven Investment Letter]( [] [Godesburg's Haven Investment Letter]( [] [Garrett Pic] Market momentum is Red. It didn’t take long, but this market rolled over after pushing the 3,750 level and started to break down in the afternoon. The only sector generating gains is the energy sector, while real estate and utility stocks began breaking down again due to rising interest rates and Treasury yields. Dear Investor, If you’ve known me long enough, you know I’m simple. I live on a small farm. I have a simple diet. I don’t watch a lot of television. I’m just looking for a way to educate people on their money – plain and simple. So, I thought I’d take a step back and give you a simple approach to these markets. Let’s talk about stocks that can make you rich in a bear market. There’s no tech. No social media. No names in fancy retail names. I’m only focused on companies that produce real stuff that we need… For less than the sum of their worth. These Companies Trade for Less Than the Sum of Their Parts If you like things on sale like me, you’ll wait for a deal at the grocery store. You can get the same sort of discounts in the market if you’re patient. In the case of stocks, I want to own things that are trading for less than their liquidation value. What does that mean? Well, if we talk about the company’s tangible assets – we’re thinking about its cash on the balance sheet, machinery, real estate, and inventory. So – if a company’s cash, land, machines, and inventory come up to $15.00 per share. But the stock is trading for $12.00 – it’s trading for 80% of the sum of its parts. I know that sounds crazy, but it happens all the time. There are dozens of stocks in commodity-producing industries, home-building sectors, and financials that trade for less than the sum of their parts. Typically, they fall in the small-cap category as institutions like hedge funds have too much money to arbitrage the disconnect between the stock’s value and its tangible value. How I Screen These Stocks in Today’s Market To identify the best companies trading on the cheap… I like to add one additional factor. I add the Altman Z Score as a tool to identify strong balance sheets that don’t expose the companies to any serious credit events. If you’ve followed my insight on F&Z stocks at the start of each month, you know the importance of this tool. The Altman Z-score. is a weighted average of five different metrics to determine whether a company might go out of business. If a company falls below 2.6, it has a risky balance sheet. That risk is tied to a balance sheet that likely has lots of debt or weak cash flow. We are looking for stocks with a Z-score of 3 or higher. By adding a valuation score on top of the Z score and tangible book value, I found 23 companies that were trading for less than the sum of their parts. These companies operate in the steel, oil & gas, forest products, hardware, chemicals, and machinery businesses. Let’s take a look at three great buys today. Cheap Stock No. 1: Friedman Industries (FRD) Friedman trades for 67 cents on the dollar. The Texas-based nano-cap stock producers tubing for Texas energy companies and sells steel products to manufacturers of shipping containers. This year, FRD has traded like any other momentum stock – but it bucked the trend of Wednesday when it surged 12%. This is a retirement stock. At some point, the company will likely look for an exit, and would be an attractive target for a mid-cap competitor. There is no options chain for this stock. However, investors can set a limit order on the stock at a lower level, and if it pulls back, you can purchase shares. Consider a $9.00 limit order. Cheap Stock No. 2: Franklin Wireless (FKWL) Franklin Wireless is a stock trading at 91% tangible book value, making it one of the more confounding value stocks on the market. The company produces hardware for mobile hotspots, cloud-based servers and IoT tracking devices. With a market capitalization of just $35.4 million, the company will always go overlooked by Wall Street. The stock isn’t covered by analysts and there isn’t an options chain for the stock. The company’s primary customer is Verizon, supplying technology for WiFi hotspots. Following a recall of products in April 2021, the stock’s value has plunged by roughly 81%. That said, it has plunged to a level that is mathematically irrational. It still has plenty of assets, a very strong Z score of 4.17, and several bloggers believe that Verizon’s recall was self-serving and unwarranted. It makes for a compelling buy-and-hold lottery pick with very limited downside. Cheap Stock No. 3: Intrepid Potash (IPI) Finally, this final discount stock makes little sense to me. The world is struggling to feed people. And we need a lot of fertilizer to increase grain output in the years ahead. Intrepid Potash is a Denver-based manufacturer of potassium chloride, a critical fertilizer. It has three mines in New Mexico and Utah. The company’s market capitalization is roughly $581 million, making it more of a retail stock. The recent run to $120 followed by a crash on the back side of 2022 has many investors steering clear. This is a mistake. The stock is trading for roughly 81 cents on the dollar. With enough patience, Intrepid Potash will push higher as demand increases for its product. Enjoy your day, [Garrett signature] Garrett {NAME} [] [Garrett Pic] Market momentum is Red. It didn’t take long, but this market rolled over after pushing the 3,750 level and started to break down in the afternoon. The only sector generating gains is the energy sector, while real estate and utility stocks began breaking down again due to rising interest rates and Treasury yields. Dear Investor, If you’ve known me long enough, you know I’m simple. I live on a small farm. I have a simple diet. I don’t watch a lot of television. I’m just looking for a way to educate people on their money – plain and simple. So, I thought I’d take a step back and give you a simple approach to these markets. Let’s talk about stocks that can make you rich in a bear market. There’s no tech. No social media. No names in fancy retail names. I’m only focused on companies that produce real stuff that we need… For less than the sum of their worth. These Companies Trade for Less Than the Sum of Their Parts If you like things on sale like me, you’ll wait for a deal at the grocery store. You can get the same sort of discounts in the market if you’re patient. In the case of stocks, I want to own things that are trading for less than their liquidation value. What does that mean? Well, if we talk about the company’s tangible assets – we’re thinking about its cash on the balance sheet, machinery, real estate, and inventory. So – if a company’s cash, land, machines, and inventory come up to $15.00 per share. But the stock is trading for $12.00 – it’s trading for 80% of the sum of its parts. I know that sounds crazy, but it happens all the time. There are dozens of stocks in commodity-producing industries, home-building sectors, and financials that trade for less than the sum of their parts. Typically, they fall in the small-cap category as institutions like hedge funds have too much money to arbitrage the disconnect between the stock’s value and its tangible value. How I Screen These Stocks in Today’s Market To identify the best companies trading on the cheap… I like to add one additional factor. I add the Altman Z Score as a tool to identify strong balance sheets that don’t expose the companies to any serious credit events. If you’ve followed my insight on F&Z stocks at the start of each month, you know the importance of this tool. The Altman Z-score. is a weighted average of five different metrics to determine whether a company might go out of business. If a company falls below 2.6, it has a risky balance sheet. That risk is tied to a balance sheet that likely has lots of debt or weak cash flow. We are looking for stocks with a Z-score of 3 or higher. By adding a valuation score on top of the Z score and tangible book value, I found 23 companies that were trading for less than the sum of their parts. These companies operate in the steel, oil & gas, forest products, hardware, chemicals, and machinery businesses. Let’s take a look at three great buys today. Cheap Stock No. 1: Friedman Industries (FRD) Friedman trades for 67 cents on the dollar. The Texas-based nano-cap stock producers tubing for Texas energy companies and sells steel products to manufacturers of shipping containers. This year, FRD has traded like any other momentum stock – but it bucked the trend of Wednesday when it surged 12%. This is a retirement stock. At some point, the company will likely look for an exit, and would be an attractive target for a mid-cap competitor. There is no options chain for this stock. However, investors can set a limit order on the stock at a lower level, and if it pulls back, you can purchase shares. Consider a $9.00 limit order. Cheap Stock No. 2: Franklin Wireless (FKWL) Franklin Wireless is a stock trading at 91% tangible book value, making it one of the more confounding value stocks on the market. The company produces hardware for mobile hotspots, cloud-based servers and IoT tracking devices. With a market capitalization of just $35.4 million, the company will always go overlooked by Wall Street. The stock isn’t covered by analysts and there isn’t an options chain for the stock. The company’s primary customer is Verizon, supplying technology for WiFi hotspots. Following a recall of products in April 2021, the stock’s value has plunged by roughly 81%. That said, it has plunged to a level that is mathematically irrational. It still has plenty of assets, a very strong Z score of 4.17, and several bloggers believe that Verizon’s recall was self-serving and unwarranted. It makes for a compelling buy-and-hold lottery pick with very limited downside. Cheap Stock No. 3: Intrepid Potash (IPI) Finally, this final discount stock makes little sense to me. The world is struggling to feed people. And we need a lot of fertilizer to increase grain output in the years ahead. Intrepid Potash is a Denver-based manufacturer of potassium chloride, a critical fertilizer. It has three mines in New Mexico and Utah. The company’s market capitalization is roughly $581 million, making it more of a retail stock. The recent run to $120 followed by a crash on the back side of 2022 has many investors steering clear. This is a mistake. The stock is trading for roughly 81 cents on the dollar. With enough patience, Intrepid Potash will push higher as demand increases for its product. Enjoy your day, [Garrett signature] Garrett {NAME} [] © 2022 Godesburg Financial Publishing, Inc. 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Please be aware that the claims regarding investing or trading results of non-employees are not tracked by GFP nor can they be verified. As always, past performance is not necessarily indicative of future results. Therefore, results presented in this email should NOT be considered TYPICAL. Actual results can and will vary based on everything from experience, ability, risk mitigation practices, and market volatility... to the amount of money exposed in the investment or trade. Investing and trading are speculative and carry serious risk. You may lose some, all - or possibly more - than your original investment or trade. GODESBURG FINANCIAL PUBLISHING IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER: GFP, including its owners and employees, are NOT registered as securities broker-dealers, brokers, or any sort of registered investment advisors with the U.S. Securities and Exchange Commission, any state securities regulatory authorities, or any self-regulatory organizations. GODESBURG FINANCIAL PUBLISHING EMPLOYEES MAY HOLD SECURITIES DISCUSSED: If a writer holds any securities in a communication, it will be disclosed along with the information on the potential investment or trade. HIR, its owners or employees, have not been - or ever will be - paid by the issuer of a security mentioned in our services or communications. GFP, its owners and employees are paid entirely or in part from commissions based on sales of their services to subscribers. For more information please visit [our disclaimer page here](. [] Sent to: {EMAIL} [UNSUBSCRIBE]( [] © 2022 Godesburg Financial Publishing, Inc. DISCLAIMER: COMMUNICATIONS FROM GODESBURG FINANCIAL PUBLISHING (GFP) ARE FOR EDUCATIONAL AND INFORMATIONAL PURPOSES ONLY – NOT INVESTMENT ADVICE: GFP and all the services it offers are for educational and informational purposes only and should NOT be understood to be securities-related offers or solicitations. None of GFP’s communications should be considered or used as personalized investment advice. GFP recommends that you speak with a licensed professional before making any investment decision. RESULTS PRESENTED ARE NOT NECCESSARILY TYPICAL OR VERIFIED: GFP communications may include information regarding the historical trading performance of gurus in their services (all verified by a third party), as well as testimonials of non-employees depicting profitable investments and trades that are believed to be true based on the representations of the persons providing the testimonial of their own free will. Please be aware that the claims regarding investing or trading results of non-employees are not tracked by GFP nor can they be verified. As always, past performance is not necessarily indicative of future results. Therefore, results presented in this email should NOT be considered TYPICAL. Actual results can and will vary based on everything from experience, ability, risk mitigation practices, and market volatility... to the amount of money exposed in the investment or trade. Investing and trading are speculative and carry serious risk. You may lose some, all - or possibly more - than your original investment or trade. GODESBURG FINANCIAL PUBLISHING IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER: GFP, including its owners and employees, are NOT registered as securities broker-dealers, brokers, or any sort of registered investment advisors with the U.S. Securities and Exchange Commission, any state securities regulatory authorities, or any self-regulatory organizations. GODESBURG FINANCIAL PUBLISHING EMPLOYEES MAY HOLD SECURITIES DISCUSSED: If a writer holds any securities in a communication, it will be disclosed along with the information on the potential investment or trade. HIR, its owners or employees, have not been - or ever will be - paid by the issuer of a security mentioned in our services or communications. GFP, its owners and employees are paid entirely or in part from commissions based on sales of their services to subscribers. For more information please visit [our disclaimer page here](. [] Sent to: {EMAIL} [UNSUBSCRIBE](