Don't get nutmegged by Wall Street!

I find it amazing that a panoply of free financial tools exist on the web and yet we investors seem to get "nutmegged" (pejorative term for fooled) by Wall Street time and time again.

So I tried MSN Money Investment toolbox (a free internet stock screener) to apply some financial criteria to discover companies that might be bargains.

Expedia (EXPE), LandAmerica Financial Group (LFG), USEC Inc. (USU), and Hanes Brands (HBI) all passed a simple test of value.

1. Price / Book Value "<" 1
2. Price / CashFlow "<" 15
3. Market Capitalization > $300 Million (Not a microcap )


4. EPS Growth Qtr. vs Qtr > 15% (Healthy earnings growth)


5. Debt / Equity "<" 0.4 (Low debt level)

These companies are trading below book-value, and their quarter-over-quarter earnings have increased by 15%. In addition the Price-to-cashflow ratios of these companies are below 15, i.e. an average cashflow yield of approximately 10%.

What I particularly like about Hanes Brands (HBI) is that it was recently spun-off from Sara Lee. Joel Greenblatt (Gotham Capital) in his book "How you can be a stock market genius" (a cheesy title for a wonderful book) suggests that spin-offs generally tend to outperform the market in their second year as independent comapnies. Minimal coverage of Hanes Brands by Wall Street analysts and a healthy balance sheet are additional factors that I find appealing.

I will cover these stocks with greater detail in my future posts.

Disclosure: I don't have any positions in the stocks mentioned in this posting.