Revealed: My 3 Dirt-Cheap Money Stocks

A Motley Fool Inside Value Special Report

Dirt Cheap Money Stock #1: First Data

If you own a credit card or debit card or have ever wired money to a family member or friend, you've probably done business with this industry giant.

First Data [NYSE: FDC] is everywhere. The company's about to spin off powerhouse subsidiary Western Union to its shareholders -- but that's only one of many of its superb divisions whose fingerprint is worldwide.

And that's absolutely critical because China and India will fuel the company's growth as this industry leader digests a series of blockbuster acquisitions. That's about as close as you need to come to a "macro" economic prediction for this one to be a HUGE winner!

FDC -- The Vitals

Intrinsic Value $56
Buy Below $45
Recent Price $46
Market Cap $35B
P/E Ratio 22.6
Dividend Yield 0.50%

Millions of dollars, except per share data. Source: CapitalIQ as of 06/01/06

But here's the kicker: First Data is a HUGE value at today's prices. Short-sighted investors have given you a rare opportunity to snatch up this cash machine CHEAP.

Dirt Cheap Money Stock #2:
Federated Investors

Killer asset management firms turn "earnings" into free cash -- best case, cash flow actually exceeds net income. That's the case with my No. 2 Dirt Cheap Money Stock -- Federated Investors [NYSE: FII].

It's true -- the now infamous market-timing scandals cost Federated dearly. The company admitted to over 100 cases of market timing and set aside millions in fourth-quarter earnings.

But that's how bargains are born. And why you can get a proven winner that's growing, both by gobbling up smaller companies and the asset management portfolios of larger companies, at fire-sale prices.

FII-- The Vitals

Intrinsic Value $44
Buy Below $35
Recent Price $32
Market Cap $3.48B
P/E Ratio 17.4
Dividend Yield 2.20%

Millions of dollars, except per share data. Source: CapitalIQ as of 06/01/06

And here's the best part of all -- Federated's high-margin equity assets continue to expand, which is the No. 1 reason why investors should be snapping up on this bargain.

Dirt Cheap Money Stock #3:
Lloyds TSB

The U.K.'s Lloyds TSB [NYSE: LYG] is a textbook turnaround story. The company has its hand in everything -- from asset management, retail banking, mortgages, and insurance to credit cards and international banking.

But leveraging relationships with its customers is management's top priority and Lloyds' ace in the hole. As we speak, CEO Eric Daniels is leading the charge to cross-sell credit cards, insurance, and other products to its retail customefrs.

LYG -- The Vitals

Intrinsic Value $44
Buy Below $34
Recent Price $38
Market Cap $54B
P/E Ratio 11.77
Dividend Yield 6.2%

Millions of dollars, except per share data. Source: CapitalIQ as of 06/01/06

Astute investors will grab Lloyds, locking in an amazing 6% dividend yield and huge potential for share appreciation.

All three of my Money Stocks are active Inside Value recommendations. You can buy any one of these stocks, or all three, with great confidence today. Do so and I fully expect you will outperform the market in 2006 and beyond.

Of course, what you've just enjoyed is a sample of the detailed analysis you'll receive each month along with your two market-beating value picks when you become an Inside Value member. In fact, it's as easy as reading the morning paper or surfing the web.

Now, you can get research like that delivered to your door or inbox!

To judge by my buy-below prices, you might think my profit "projections" for these 3 Dirt Cheap Money Stocks are modest. Especially compared to the 39,000% returns or "10 stocks poised to double" promised by other "advisors."

But before you jump to conclusions, carefully consider these two points:

First, my estimates are conservative... and I always bake in a comfortable margin of safety. That's how you avoid the landmines that inevitably bring down growth investors and the only way to protect and safely grow your wealth over time.

Second, it's flat-out impossible to consistently and safely earn the ridiculous returns these chaps promise without true insider information, which is illegal to trade on for one thing. And these guys don't have it, for another.

Again, the only way to safely and consistently beat the market is to buy and hold specific stocks that meet the criteria set forth by Ben Graham in his 1934 book.

I hope I don't sound like a broken record, but that's the investing "secret" I've been telling you about... the tried-and-true methodology passed down through Warren Buffett to Walter Schloss... to Peter Lynch... and finally to lifelong students like you and me.

But it's no secret! Would you believe there's even a name for this special type of stocks?

These are the market-killers represented in that chart I showed you earlier. So, you think they'd be like "needles in a haystack." In fact, there's a name for this special type of stocks and the savvy investors who buy them -- and it's a name you already know and have heard countless times today.

That name is value.

But what exactly is value? Well, contrary to popular belief, it's not the opposite of growth. Yes, value stocks typically pay dividends, unlike most growth stocks. And, true, these companies tend to generate steady earnings and cash flows.

However, a value stock can represent a slow grower or fast one. And it might surprise you to hear these companies can operate in any industry, including technology and biotech. But there are certain characteristics you MUST always insist on...

  1. A stock selling below the fair value of the company's underlying business.
  2. A stock temporarily out of favor or misunderstood.
  3. A stock selling at historically low multiples to earnings, sales, or cash flow.

Value is all of this but much more besides. More than anything, value investing means buying a margin of safety. Remember that chart that showed you how one type of stocks methodically turned $1,000 into $8 million?

Turns $1000 into $8,000,000

And that's why I call my service Inside Value. Because when you're a member, I pass on everything I've learned about value investing to you. And together we apply these time-tested principles in your quest to build the kind of immutable wealth reflected in that chart... safely.

Is it worth the trouble? I'm sure you'll agree it is.

And I bet that sounds like a club you'd like to join

I sure hope it does. But I realize this remarkable style of investing isn't for everyone. Some investors actually like the thrill of rolling the dice with their lifesavings. Others don't have the temperament to invest in individual stocks.

At least the second group I can understand -- though I hope they understand that their apprehension is costing them, especially when there is a service like Inside Value to take the guesswork out of investing and offer them all the support they need.

As for the first group, why they continue to put their financial futures in great peril seems a complete mystery. Or at least it was until that fateful night revealed to me...

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