6 Stocks That Are Ugly Enough to Love

The broad American stock market is down 43% year to date. Some industries envy that performance. Big investment banks have lost 80%. Television broadcasters are down 84%. Home builders have fallen 66% — on top of a 60% decline last year.

Those groups and others were well represented on a recent search I ran for companies trading below what I call their ugly prices. I figure that even the worst-performing company in a miserable economy is worth a look by stock investors if either or both of two conditions is true: It trades well below its liquidation value, or it carries a reliable dividend yield that's high enough for an investor to pocket all of the money they put up in less than a decade.

Forget about low price/earnings ratios for this search, because companies can't be counted on right now to meet earnings forecasts. As I noted Monday, estimates seem suspiciously high, most likely because not all Wall Street analysts have gotten around to publishing revised numbers. Moreover, ugly surprises loom.

Going into 2008, S&P 500 companies had $63 billion in excess funding for their pensions, their biggest cushion in 12 years. But more than 60% of pension assets were in stocks, and the pension math that yielded such a big surplus was based on an assumption of 8% yearly returns. Don't be surprised if companies end 2008 with the largest pension underfunding in U.S. history, and start taking big charges to profits to shore up their accounts.

Instead of earnings, I based my search on something called tangible book value. That's what a company's accountants figure it would get for its hard assets in a liquidation sale. Only those accountants' estimates can't quite be trusted right now, because some assets have recently plunged in value. So I looked for companies that are trading for less than 25 cents per dollar of tangible book value. Such companies are worth more dead than alive.

Unless, of course, they can provide investors with big, reliable cash payments starting right away. An investor who pays 12 times a company's dividend for its shares (one who buys when the yield is over 8.3%, in other words) makes his money back in about eight and a half years, assuming payments are reinvested quarterly. So I looked for companies that are trading for less than the sum of 25% of their tangible book value and 12 times their yearly dividends. For example, a company with $10 in tangible book value and a yearly dividend of 50 cents would have to trade for less than $8.50 ($2.50 + $6) to have made my list. A few other demands: Companies had to be modestly priced relative to their free cash flow, had to produce at least $500 million in yearly sales and couldn't make the cut on book value alone — dividend yields had to top 3%.

Worrisomely, Citigroup (C) led my initial list of screen survivors. I might have cut it for what seems like a book value that's difficult to nail down, but the government has spared me the trouble. As a condition of receiving a recent cash injection from taxpayers, Citi is prohibited from paying more than a penny per quarter in dividends. Bank of America (BAC) made the list at a price well below one I thought looked low enough earlier this month. Pfizer (PFE) shares have lost 7%, about half as much as the broad market, since I called them a good deal in mid-October. Earlier this month, I noted Eastman Kodak (EK) had fallen well below its ugly price of about $9. It's uglier still, at $7 and change.

CBS (CBS) makes 70% of its money from advertising, making it twice as exposed as media conglomerate peers to slashed marketing budgets. Management says it's committed to paying the company's dividend. Investors seem to think otherwise, judging by the suspiciously high yield of almost 22%. Journal Communications (JRN) has lost 78% since I judged the stock unworthy of a purchase in December because of the company's hoarding of voting rights through a complex share structure (something all too common in the newspaper business). Bad news: While the company already trades at well less than it might fetch in a private sale, ordinary shareholders can't unlock that value, because they don't have a full say. Good news: The dividend is the same for super-voting shares as for regular ones, so until the money runs out, everyone gets paid. Current yield: 20%.

See the full list below. Proceed with caution: While women's clothing seller Christopher & Banks (CBK) is debt-free, others owe plenty. Also, some of the share prices are low for my tastes. A low price is generally a good thing, but one that crosses below $5 creates a risk of mandatory selling by institutions.