20 Soaring Stocks Still Undervalued

12/20/2010 11:15 am EST

Focus: STOCKS

By Eben Esterhuizen of Kapitall.com

Some believe that Wall Street focuses myopically on earnings while ignoring the "real" cash that a firm generates. Earnings can often be clouded by accounting gimmicks, but it's tougher to fake cash flow. For this reason, some investors believe that free cash flow (FCF) gives a much clearer view of the ability to generate cash (and thus, profits).

Free cash flow is a measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make acquisitions, pay dividends, and reduce debt.

The following is a list of stocks that have reached new highs during recent sessions. All of these stocks are undervalued when comparing the current price to the free cash flow per share (P/FCF ratio).

To compile the list, we started with a universe of about 200 companies that have hit highs during recent sessions. We then narrowed down the list by only focusing on those stocks that have low P/FCF values.

This list might offer a good starting point for value-oriented momentum traders and investors.

Annaly Capital Management, Inc. (NLY): REIT. Market cap of $11.33 billion. P/FCF ratio at 1.53. Short float at 4.61%, which implies a short ratio of 3.04 days. The stock has gained 13.73% over the last year.



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American International Group, Inc. (AIG): Property and casualty insurance industry. Market cap of $32.38 billion. P/FCF ratio at 1.65. Short float at 14.5%, which implies a short ratio of 3.85 days. The stock has gained 71.03% over the last year.



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American Equity Investment Life Holding Co. (AEL): Life insurance industry. Market cap of $739.12 million. P/FCF ratio at 1.92. Short float at 11.43%, which implies a short ratio of 7.82 days. The stock has gained 64.06% over the last year.



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Protective Life Corp. (PL): Life insurance industry. Market cap of $2.28 billion. P/FCF ratio at 2.31. Short float at 4.07%, which implies a short ratio of 6.38 days. The stock has gained 58.96% over the last year.



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American Financial Group Inc. (AFG): Property and casualty insurance industry. Market cap of $3.51 billion. P/FCF ratio at 4.4. Short float at 0.71%, which implies a short ratio of 1.58 days. The stock has gained 39.18% over the last year.



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Delphi Financial Group, Inc. (DFG): Life insurance industry. Market cap of $1.56 billion. P/FCF ratio at 4.4. Short float at 5.03%, which implies a short ratio of 10.33 days. The stock has gained 33.64% over the last year.



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Montpelier RE Holdings Ltd. (MRH): Property and casualty insurance industry. Market cap of $1.36 billion. P/FCF ratio at 4.49. Short float at 6.88%, which implies a short ratio of 7.22 days. The stock has gained 18.03% over the last year.



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Principal Financial Group Inc. (PFG):Asset management industry. Market cap of $10.19 billion. P/FCF ratio at 4.7. Short float at 3.34%, which implies a short ratio of 3.56 days. The stock has gained 37.57% over the last year.



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Renaissance RE Holdings Ltd. (RNR): Property and casualty insurance industry. Market cap of $3.49 billion. P/FCF ratio at 6.55. Short float at 2.04%, which implies a short ratio of 3.04 days. The stock has gained 21.65% over the last year.



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TRW Automotive Holdings Corp. (TRW): Auto parts industry. Market cap of $6.35 billion. P/FCF ratio at 6.65. Short float at 3.97%, which implies a short ratio of 2.74 days. The stock has gained 116.41% over the last year.



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Selective Insurance Group Inc. (SIGI): Property and casualty insurance industry. Market cap of $958.9 million. P/FCF ratio at 6.71. Short float at 2.22%, which implies a short ratio of 8.37 days. The stock has gained 15.91% over the last year.



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CNA Surety Corp. (SUR): Surety and title insurance industry. Market cap of $1.06 billion. P/FCF ratio at 6.98. Short float at 1.11%, which implies a short ratio of 3.29 days. The stock has gained 60.89% over the last year.



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Petrobras Energia (PZE): Major integrated oil and gas industry. Market cap of $2.44 billion. P/FCF ratio at 7.33. Short float at 1.2%, which implies a short ratio of 4.05 days. The stock has gained 53.6% over the last year.



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CNH Global NV (CNH):Farming and construction machinery industry. Market cap of $11.05 billion. P/FCF ratio at 7.41. Short float at 1.58%, which implies a short ratio of 1.15 days. The stock has gained 94.4% over the last year.



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Tri-Continental Corporation (TY): Closed-end fund. Market cap of $942.25 million. P/FCF ratio at 7.6. Short float at 1.46%, which implies a short ratio of 10.48 days. The stock has gained 22.1% over the last year.



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Navigators Group Inc. (NAVG): Property and casualty insurance industry. Market cap of $893.55 million. P/FCF ratio at 8.07. Short float at 3.47%, which implies a short ratio of 12.33 days. The stock has gained 7.41% over the last year.



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Verizon Communications Inc. (VZ): Telecom services. Market cap of $96.42 billion. P/FCF ratio at 8.15. Short float at 1.52%, which implies a short ratio of 2.5 days. The stock has gained 7.64% over the last year.



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Helen of Troy Limited (HELE): Appliances industry. Market cap of $882.43 million. P/FCF ratio at 8.4. Short float at 2.66%, which implies a short ratio of 4.39 days. The stock has gained 31.21% over the last year.



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Qwest Communications International Inc. (Q): Telecom services. Market cap of $12.95 billion. P/FCF ratio at 9.19. Short float at 8.27%, which implies a short ratio of 5.83 days. The stock has gained 91.99% over the last year.



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MI Developments Inc. (MIM): Property management industry. Market cap of $795.94 million. P/FCF ratio at 9.47. Short float at 0.09%, which implies a short ratio of 0.37 days. The stock has gained 39.56% over the last year.



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By Eben Esterhuizen of Kapitall.com

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