5 value stocks for today

By Matt Koppenheffer, The Motley Fool

Are you familiar with the dynamic duo of Fama and French? No, they didn't star in "Black Sheep" -- that was Farley and Spade. And they didn't perform "Who's on First?" -- that was Abbott and Costello.

The names Eugene Fama and Kenneth French may not come up in most dinner conversations, but the two have done some of the most compelling academic research on stocks that I've read. In contrast to the consensus among academics, they've proposed that there's more to stock returns than volatility.

In research conducted over various periods and across multiple locations, Fama and French determined that stocks characterized as "value stocks" have consistently outperformed nonvalue stocks.

• The death of value investing

Today, I've rounded up five value stocks trading at less than 1.5 times their tangible book value. To focus on high-quality stocks, I've cross-referenced these against ratings from our MSN CAPS community of more than 130,000 investors.

Untapped value

Company	Sector	Book value multiple	Earnings per share	2009 change	CAPS rating
Anadarko Petroleum	Oil and natural gas	1.3	$5.64	13%	*****
BP	Oil and natural gas	1.6	$5.25	(1%)	*****
NetGear	Communication equipment	1.3	$0.19	18%	*****
Nucor	Steel	1.8	$3.98	(14%)	****
Walt Disney	Entertainment and media	1.4	$1.84	4%	****

The CAPS community obviously likes these stocks; three have the highest-possible five-star rating. But I would advise against investing in any stock on the basis of one metric alone. With that in mind, I thought I'd dig in a little on Walt Disney (DIS, news, msgs).

There aren't all that many businesses that have truly strong and durable moats -- some special circumstance that insulates them from competition. Coca-Cola (KO, news, msgs) has it, thanks to its secret cola formula. And the capital allocation savvy of Warren Buffett gives Berkshire Hathaway (BRK.A, news, msgs) an edge.

And Disney -- with its iconic brands, one-of-a-kind parks and stranglehold on the "wholesome" slice of the entertainment pie -– is similarly protected.

The overarching Disney brand is, of course, the company's crown jewel. Interbrand, in its 2008 ranking of the world's best brands, slotted the Burbank, Calif., company in the No. 9 spot, and slapped a $29 billion valuation on the Disney name.

But Disney isn't the only brand under the corporate umbrella -- the company also controls the ABC television network, cable and Web stalwart ESPN and film studio Pixar Animation, among others.

The entertainment business is driven by hits, which can make results for a company like Disney a bit lumpy. However, it's no stretch to say that over Disney's 85-year history it's had far more hits than misses. Ain't that right, Hannah Montana?

Let's be frank here, Disney's most-recent quarter was a clunker. Revenue fell just 7%, but profit slid 26%. That shouldn’t be all that surprising though, because, iconic or not, Disney's products and services are highly discretionary.

But with 3,660 outperform ratings versus just 302 underperform ratings, the MSN CAPS community has shown that it's willing to focus on Disney's long-term prospects rather than short-term fluctuations.

A CAPS participant who is among the Disney bulls, "TMFBreakerJava," had this to say about the stock: "A visit to a Disney theme park gives you some insight into the power of their brand and their unique capability to produce an unforgettable experience. Somehow they get the staff of this vast organization to work as one in delivering enjoyment and satisfaction to their guests."

Pixar Animation co-founder John Lasseter, who pioneered feature-length computer animation with the two "Toy Story" movies, has injected new vitality into the old Disney animation unit, while the Pixar team remains intact and continues to do its magic. "The Incredibles," "Cars," "Ratatouille" and this year "Wall-E" demonstrate that they are great storytellers.

Short-term economic pain may slow Disney down, but the entertainment and media powerhouse is sound and on track for continued success.

Let the CAPS community know what you think of these or any other stocks. CAPS offers a variety of tools to help investors.

The community's organizing principle is that collective estimates are often superior to the judgments of most individuals, and that a system that incorporates the knowledge, information and skills of the many can help the individual beat the market.