Top 10 Deep Value Stocks
| # | Ticker | Sector | PE | Med | Disc% | ROE | Grth | Score |
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| # | Ticker | Sector | PE | Med | Disc% | ROE | Grth | Score |
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| # | Ticker | Shares | Price | Cost | Wt% | MCR | RC% | Vol |
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A value trap is a stock that looks cheap on traditional metrics (low PE, low P/B) but is cheap for a reason — the business is deteriorating. These stocks lure value investors with attractive valuations, then continue declining. The screener flags stocks removed during filtering that show warning signs:
| Ticker | Type | PE | ROE | Reason |
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A practical guide to interpreting every metric, table, and signal on this dashboard.
Scans all constituents of SPY, QQQ, or IWM for stocks trading below their sector's valuation norms.
Removes low-quality stocks: ROE must exceed 10%, earnings must be growing, and free cash flow must be positive.
Ranks surviving stocks on a 0–100 composite score weighting valuation, profitability, growth, and financial health.
Flags value traps—stocks that look cheap but are deteriorating—using momentum, Z-Score, dividend, and earnings filters.
The main table shows the highest-scoring deep value candidates after all filters. Here is what each column means:
| Column | Full Name | What It Tells You | What to Look For |
|---|---|---|---|
PE | Trailing Price-to-Earnings | How much you pay per dollar of earnings. Calculated as stock price ÷ last 12 months’ earnings per share. | Lower is cheaper. Compare against Med, not in isolation. |
Med | Sector Median PE | The median PE of every stock in the same sector within this index. This is the benchmark for “fair value.” | Provides context. A PE of 15 is cheap in Tech (median ~25) but expensive in Energy (median ~10). |
Disc% | PE Discount vs Sector | How far below (or above) the sector median this stock trades. Formula: (Median − PE) / Median × 100 | Positive = undervalued vs peers. Negative = overvalued. Higher discount = more potential upside. |
ROE | Return on Equity | Net income as a percentage of shareholders’ equity. Measures how efficiently the company converts equity into profit. | Must be >10% to appear. Above 20% is strong. Warren Buffett targets 15%+. |
Grth | YoY Earnings Growth | How much earnings grew compared to the same period last year. Revenue growth is used as a fallback. | Must be positive. Higher growth justifies a higher valuation and suggests improving fundamentals. |
Score | Composite Value Score | Weighted blend of Valuation (40%), ROE (25%), Growth (20%), and Financial Health (15%). Range: 0–100. | 70+ = Strong candidate. 50–70 = Decent. <50 = Marginal. |
Measures how far below the sector average PE and P/B the stock trades. A stock at 50%+ below the sector median scores 100; at the median scores 50; 50%+ above scores 0.
Rewards companies that generate high returns from shareholder capital. The score scales linearly: ROE of 10% ≈ 44 points, 20% ≈ 58, 30%+ ≈ 72.
Ensures cheap stocks aren’t shrinking. Uses YoY earnings growth (revenue growth as fallback). 0% = 30 points, 50% = 48, 100% = 65, 200% = 100.
Combines Debt-to-Equity ratio and Free Cash Flow. D/E < 0.3 = 95 points, D/E > 3 = 10 points. A +10 bonus is added for positive FCF.
The position sizing table uses Equal Risk Contribution (ERC) optimization to allocate a hypothetical $100,000 portfolio. Instead of equal dollar weights, each stock contributes equally to total portfolio risk.
| Column | What It Means | Interpretation |
|---|---|---|
Wt% | Portfolio weight allocation | Determined by ERC. More volatile stocks get smaller weights so they don’t dominate risk. |
MCR | Marginal Contribution to Risk | How much adding a small amount of this stock increases portfolio volatility. ERC equalizes this across all holdings. |
RC% | Risk Contribution | Share of total portfolio risk from this stock. In a perfect ERC portfolio, every stock shows the same RC%. |
Vol | Annualized Volatility | Individual stock’s price variability (daily σ × √252). Higher = more volatile. Compare against the portfolio’s aggregate vol. |
The risk card summarizes how much you could lose and how well the portfolio compensates for that risk.
(Return − Rf) ÷ Volatility
Measures excess return per unit of risk. >2 = excellent, 1–2 = good, <1 = poor. Named after Nobel laureate William Sharpe.
(Return − Rf) ÷ Downside Deviation
Like Sharpe, but only penalizes downside moves. A stock that swings up a lot but rarely drops will have a high Sortino even if Sharpe is moderate.
Cornish-Fisher expansion
The worst expected daily loss at 95% confidence. “−1.5%” means on 95% of trading days, you won’t lose more than 1.5%. Adjusted for skewness and fat tails.
Average of worst 5% of days
Conditional VaR (Expected Shortfall). When losses exceed VaR, how bad does it get on average? Always worse than VaR—this captures tail risk.
Largest peak-to-trough decline (1Y)
The worst losing streak over the past year. A −20% max drawdown means at some point, the portfolio fell 20% from its high before recovering.
Ledoit-Wolf shrinkage estimator
The correlation matrix (how stocks move together) uses Ledoit-Wolf shrinkage, which blends sample data with a structured estimate to reduce noise from limited observations.
A value trap is a stock that appears cheap on traditional metrics but is cheap for a reason—the business is deteriorating. These filters catch the most common traps before they enter the Top 10:
Triggers when the stock is trading >15% below its 200-day simple moving average.
Sustained selling pressure suggests institutional investors are exiting. A “cheap” stock that keeps getting cheaper is a falling knife. The 200-day SMA is the most widely watched long-term trend indicator.
Triggers when Altman Z-Score < 1.8 (non-financial, non-utility companies only).
Developed by NYU professor Edward Altman in 1968, the Z-Score combines five financial ratios to predict bankruptcy risk. Below 1.8 is the “distress zone”—historically, ~80% of companies scoring below this level went bankrupt within 2 years.
Z = 1.2(WC/TA) + 1.4(RE/TA) + 3.3(EBIT/TA) + 0.6(MCap/TL) + 1.0(Rev/TA)
Triggers when dividend yield > 7% AND either payout ratio > 100% or negative free cash flow.
An abnormally high yield usually means the stock price has crashed (yield = dividend / price). If the company is also paying out more than it earns or has negative FCF, a dividend cut is likely—which typically triggers another price drop.
Triggers when forward PE exceeds trailing PE by >30%.
If forward PE is significantly higher than trailing PE, analysts expect earnings to decline. The stock looks cheap on trailing earnings, but next year’s earnings won’t support the current valuation. This is the most subtle trap.
Different sectors require different valuation approaches. A stock must pass at least one rule for its sector:
| Sector | Primary Rule | Alternative Rule |
|---|---|---|
| Technology | PEG < 1.5 | Forward PE below sector median |
| Communication Services | PEG < 1.5 | Forward PE below sector median |
| Financial Services | P/B < 1.2 | P/B below sector median |
| Industrials | EV/EBITDA < 10 | PE below sector median |
| Basic Materials | EV/EBITDA < 10 | PE below sector median |
| Consumer Cyclical | PE < 15 | PE below sector median |
| Consumer Defensive | PE < 15 | PE below sector median |
| Healthcare | PE below sector median | P/B below sector median |
| Energy | PE < 10 | P/B < 1.5 |
| Real Estate | P/B < 1.2 | — |
| Utilities | PE below sector median | — |
Score gives the holistic view. Disc% tells you how cheap it is relative to peers. A high score with high discount is the sweet spot.
Before researching a stock further, expand the Value Trap section and check if similar companies in the same sector were flagged. Sector-wide flags are more concerning.
If one stock’s RC% is much higher than others, the portfolio is concentrated in that stock’s risk. ERC optimization minimizes this, but check for outliers.
The same methodology runs on SPY, QQQ, and IWM. If a stock appears in multiple indices’ top 10, it’s a stronger signal.
The screener narrows 500+ stocks to ~10 candidates. Always do your own due diligence: read earnings calls, check competitive dynamics, and understand the business before investing.