Chasing Value: Barron's Is Right About Noble, Raytheon, but Forget About Its Market Strategists

Re-examining the numbers, today both stocks have impressive values. I can't say the same for Barron's story sharing the opinions of the ten selected Wall Street market strategists, but more on that later.

Noble Corp. has been hurt by all the negative activity surrounding the offshore oil business, including the BP (BP) oil spill and subsequent moratorium on drilling in the Gulf of Mexico. Noble stock was hit hard along with the industry and has only recently made strides to reverse course, but it still is way down. It closed Friday at $34.86, 23.55% off it's 52-week high of $45.60.

Noble is paying about a 2% yield and has a paltry PEG ratio of 0.87 to go along with a P/E of 6.2 (TTM). This is not all, the P/CF is 4.58 (very low), the P/S is 2.89 (average) and the P/B is 1.11, downright cheap. I can understand the retail investor shying away, but what in the world are the pro's thinking? Noble should be a jumping-off-the-page-screaming buy to them. It has low debt and a very high ROE at 32.35.

The stock is cheap period. When you consider the Swiss based company has 87% of its rigs located in international waters, plus contracts with Petroleo Brasileiro (PBR) raring to go, where is the fear coming from?

Raytheon has been affected by unwarranted fear too. Clearly there are legitimate concerns that budget hawks will target defense spending in the coming years, but RTN is well diversified and, according to Barron's, has a backlog of $36 billion. It's just as likely that defense spending will simply be cut by not increasing expenditures or that one international incident will curtail any cuts whatsoever.

RTN is paying just under 3% yield and it too has a very reasonable PEG ratio at 1.19. The P/E at 10.93 is not as depressed as Nobles but it's still below the market average and inline with competitors. I can't rave about it's 10.49 (average) P/CF, though in the P/S department it beats Noble at a very low 0.82. The P/B is 1.91, modest but not praiseworthy by itself.

Raytheon closed Friday at $46.69, 22.31% off it's 52 week high of $60.10. Again we are looking at a strong balance sheet with low debt and double digit ROE of 20.22.

Noble and Raytheon have depressed stock prices, solid balance sheets and offer rewarding and dependable yields, making both worthy of your consideration. I already own RTN and I have been considering Noble off and on for a while.

What I am not considering is paying any attention to the Barron's interviews with ten market strategists that offer little or no insight that can have any practical application to my investing perspective. I do not care where they speculate the 10-year Treasury yield will be in three months or a year. Nor do I care about the guess as to the direction of the S&P 500 or when there might be a hike in the Fed rate. None of it matters. Besides their guestimates are all over the map and none of them have any long-term track record for being right about such things.

All their credentials and ideas aside, here is the simplest reason I can give you for ignoring the noise. And it corresponds to something Jim Cramer repeats, "There is always a bull market somewhere." All I want is to be able to find a place where I can trade $1 for $2. While this is rare, it is very possible to trade $1.50 for $2.00 -- as I believe may be the case with NE and RTN. The value in these stocks, long term and short term, is much more dependent on their businesses, management, balance sheets and unpredictable events than whatever level the S&P finds itself at by the end of 2010 or even 2011 -- and much easier to evaluate.

Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture and planning firm. He writes the columns Chasing Value™ and Serious Money. Disclosure: He owns stock in RTN.