5 High-Potential Picks From Force Capital: Sears Hometown and Outlet Stores Inc (SHOS), iStar Financial Inc. (SFI)

At 1.4 times its book value, First Industrial is trading at about a 40% discount to peer averages, placing it 4th lowest out of the 13-stock industrial REIT industry. Even more interestingly, iStar trades below parity with its own book value per share, and at 0.6x, it’s in the 5th lowest percentile of the entire financial sector. If pressed to choose one, we’d go with iStar due to its extensive efforts to diversify its asset portfolio post-recession, and Wall Street predicts a double-digit upside is possible (in percentage terms) from current levels.

Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL) sits at No. 4 on this list. Jaffe increased the size of his position in the restaurant operator by more than 60% last quarter, marking the second straight quarter he’s upped his stake. Other prominent hedge fund managers like Joel Greenblatt and Glenn Russell Dubin established new positions in Cracker Barrel in Q4; Greenblatt’s presence indicates that a strong value play is present. CBRL shares do, in fact, trade at a mere 12.6 times forward earnings, and its sales valuation is a whopping 40% below parity. Since the start of the year, Cracker Barrel’s stock price has already gained almost 5%, and a dividend yield of 3% is the proverbial icing on the cake.

Ritchie Bros. Auctioneers (NYSE:RBA), lastly, rounds out Jaffe and Force’s top five. The hedge fund increased its position in the industrial auctioneering company by 19% last quarter, and he is joined by top-tier names like Israel Englander and Ken Griffin in this stock. Wall Street’s average price target on Ritchie Bros. is almost identical with its current trading price, but there’s still reason to believe in this momentum play. The sell-side predicts EPS growth to hit 20% next year and 15% annually through at least 2017. At a price-to-earnings multiple a bit less than 30x, shares are still about 20% below their industry’s average.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 25.4% between September 2012 and January 2013 versus 7.4% for the S&P 500 index. Try it now by clicking the link above.

Disclosure: none