(MONEY Magazine) – HUNTING FOR GRAHAM'S "MARGIN OF ERROR" To identify stocks that are trading for less than their underlying value, start by screening for those with a low price/book ratio. (Book value is assets minus debts.) Just go to finance.yahoo.com and then click on the Screener, about halfway down the left-hand side of the page—it's under the Stock Research heading. (The Screener uses plug-in software that doesn't work on Macs.) The price/book screen is listed under the Balance Sheet criteria.

A price/book of less than 1 means a stock is cheaper than its net assets. A score of 0.75, for example, means the company is trading at a 25% discount to book.

DIG DEEPER Graham wouldn't have stopped at price/book; some common calculations of book value include funky stuff like goodwill. You've got to look at the balance sheet line by line—and the easiest way to do that is, again, the Yahoo site. Type in a company ticker and click Go. On the next page, select Balance Sheet under Financials at the bottom of the blue bar on the left.

You'll see the most liquid assets at the very top of the balance sheet. And at the bottom is net tangible assets, which subtracts liabilities as well as goodwill and other stuff you're better off not counting on.

FISHER'S FIRST STOP There was no end to what Philip Fisher wanted to know about a company, but there's one place every growth investor should start: the stock's 10-K annual reports for the past several years. The Securities and Exchange Commission's EDGAR archive of filings is at www.sec.gov, but secinfo.com is easier to use. (It's free for 40 log-ins.) The first part to read is the management's discussion and analysis (MD&A) section. Fisher would point you to the company's evaluation of its growth potential and how its products fit into its marketplace, as well as its appraisal of its rivals. If their story doesn't ring true to you, move on. —J.F.