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Way Undervalued
  Finding undervalued stocks

2013 Way Undervalued stock picks return 135 percent in 1 year

Below were the WayUndervalued stocks as of June 21st, 2013.  At the time I was tracking about 200 stocks, not the 5,000+ that are tracked today.  These are the top 7 undervalued stocks from the list of 200:

Company

P/E Ratio used

2014 Estimated Value

2015 Estimated Value

2014 Value Discount

2015 Value Discount

Closing Stock Price on 6/21/13

Closing Stock
Price on 7/1/14

Percentage Gain
over
1 year

Southwest Airlines (LUV)

28.0

29.12

34.16

116%

153%

13.48

27.73

106%

Broadcom (BRCM)

25.9

74.51

80.97

124%

144%

33.24

37.57

13%

Goodyear Tire (GT)

18.0

37.80

45.18

153%

202%

14.94

27.86

86%

AMR Corporation (AAMRQ)

5.0

10.00

12.25

146%

202%

4.06* *AAMRQ price

24.46* *Equivalent AAL Price

502%

Skyworks Solutions Inc. (SWKS)

25.9

56.20

65.01

158%

198%

21.80

47.73

119%

RF Micro Devices (RFMD)

25.9

10.10

13.73

90%

158%

5.32

9.88

86%

Marvell Technology Group (MRVL)

25.9

21.73

24.06

94%

115%

11.19

14.61

31%

Note: I converted today’s AAL stock price of 43.86 by .5576 to get the 24.46 price since that’s how many shares of AAL each AAMRQ shareholder received thus far.

Average return for all of these: 135%.  The S&P500 returned 24% over the same 1 year period and the Dow returned 15% in the same period.

The first thing you’ll notice is that AAMRQ is off the charts.  See that ‘Q’ at the end of the ticker?  Yep, that means they were in bankruptcy.  This was one of those high risk, high reward scenarios.  As it turns out, the merger between US Airways & AMR Corp took place and this is a risk that really paid off.  I cranked down the P/E ratio on AAMRQ to 5.0 to counter-balance the risk, and it still showed up as a WayUndervalued stock.  Did I take the risk myself and buy some last year?  You betcha!  Did I have the stomach to hold onto it for very long?  No, I got out before the merger took place.  But, I currently own AAL since it is still Way Undervalued.

Another observation you might make is that 4 of these companies are chip stocks.  Were chip stocks way undervalued last year?  Apparently so!

The next thing I want to point out is that RFMD & MRVL didn’t make the WayUndervalued cut.  But 90% & 94% were close enough, so I included them.

Now let’s look at the list as a whole.  6 out of the 7 companies beat the S&P500 over the 1 year period.  How many of these stocks did I purchase myself in 2013?  I purchased all of them except MRVL.  These were by far my best investments.

Goodyear actually showed up on my radar earlier in 2013 when it traded in the $12 range.  Unfortunately, I didn’t keep good records on these until the June data above.  But, some of my Goodyear shares doubled in less than a year.  I never found rubber so fascinating!

How many of these companies are still considered WayUnderValued stocks?  AAL is the only one that makes the current list.

Reference for AAMRQ ->AAL conversion of .5576 shares:
http://aviationblog.dallasnews.com/2014/03/holders-of-old-amr-stock-to-geta-more-shares-of-new-american-airlines-group.html/