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5 Top Stocks That Are Dirt Cheap


These stocks have forward P/Es under 10 and low P/B ratios under 3.0.

These are the creme de la creme of the value stocks.

The stocks that I'm uncovering right now are the cheapest I've seen in the last six months. It is not unusual to see a single digit P/E anymore. And, to top it off, they also have rising earnings estimates and attractive earnings growth (sometimes in the double digits.) For value investors, it's like being a kid in a candy store.

But don't settle for just any cheap stock. Pick the best. The way to do that is to combine both a low valuation with the Zacks Rank.
What's a "low valuation"? Since a low price earnings ( or P/E) ratio is the most common criteria value investors look for, I searched for stocks with forward P/Es under 10. I also wanted a low price-to-book (or P/B ) ratio, which can also indicate value if it's under 3.0.

As you might imagine, many stocks in beaten down sectors like agriculture and energy fit the criteria. I winnowed it down to the top five stocks in a variety of industries. But given the stock sell off in May, there were plenty of other possibilities as well.

Five Top Stocks That Are Dirt Cheap

1. CF Industries Holdings, Inc. (CF)
2. Oil States International (OIS)
4. Owens-Illinois, Inc. (OI)
5. Tata Motors (TTM)

1. CF Industries Holdings

CF Industries manufactures nitrogen and phosphate fertilizers. It is the largest nitrogen fertilizer distributor in North America with manufacturing facilities in the United States and Canada. It's been cashing in on the record North American farmer incomes, which are coming from high commodity prices.

Zacks No. 2 Rank (Buy)
2012 Expected Earnings Growth = 9%
P/E = 6.9
P/B = 2.1

CF is dirt cheap as the fertilizers are really out of favor. It is the cheapest among its peer fertilizer companies.

2. Oil States International

Oil States rents tools to producers to be used in completion and production of a well. It's a shale play. Oil States' rental tool division is focused on the Rockies, Barnett Shale, the Mid-Continent, and in the Fayetteville Shale oil producing regions and is growing in the popular Marcellus, Haynesville, and Bakken shale regions.

Zacks No. 2 Rank (Buy)
2012 Expected Earnings Growth = 35.3%
P/E = 8.5
P/B = 1.6

Oil States hasn't missed on the estimate since 2007. What a streak!

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AGCO is another play in the agriculture sector; it makes the big equipment, like tractors. It sells four core brands in 140 countries.

Zacks No. 1 Rank (Strong Buy)
2012 Expected Earnings Growth = 24.1%
P/E = 7.4
P/B = 1.3

AGCO is cheaper than many of its competitors like Deere or CNH Global.

4. Owens-Illinois

Owens-Illinois is the largest glass manufacturer in the world and the first to use an automatic bottle making machine in production.

Zacks No. 2 Rank (Buy)
2012 Expected Earnings Growth = 21%
P/E = 6.8
P/B = 2.5

Owens-Illinois is a global company with European operations and customers. In the first quarter, it had no clarity on the European situation. This will be something to watch in the second quarter, however.

5. Tata Motors

Tata Motors is India's largest auto company. Founded in 1945, it is also the world's fourth largest truck and bus maker.

Zacks No. 1 Rank (Strong Buy)
2012 Expected Earnings Growth = 18.2%
P/E = 4.5
P/B = 3.5

Tata is the only one of the five to have a P/B ratio over 3. However, it also has a price-to-sales ratio of just 0.3. A P/S ratio under 1.0 also indicates value, so I decided to include Tata in the list. With that low P/E, it's cheaper than many of its peers, including Toyota, Ford and Honda.

Look For Opportunities

With stocks selling off, it's time for the value investors to shine. There are always opportunities to buy good companies when the bears come out to play.

But be smart. Buy companies with both value and solid fundamentals. It may seem like finding these companies would be a needle in the haystack, but if you use the Zacks Rank to narrow the field, it's easier to uncover the hidden gems.

Tracey Ryniec is the Value Stock Strategist for She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her on twitter at @TraceyRyniec.

Editor's Note: For more from, click here.
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No positions in stocks mentioned.
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