Recent worries that market indexes have been skewed higher by a small number of tech companies have started to subside, according to a recent article by Validea CEO John Reese for The Globe and Mail.

Reese cites comments by industry experts, including Robert Shiller, Wharton School professor Jeremy Siegel and GMO co-founder Jeremy Grantham, the consensus of which is that the market is not in danger of overheating and may continue to inch upward.

“If these expectations become reality,” writes Reese, “It will become all the more important to hunt for value.” However, he argues, this becomes tougher as more investors join the search. For this reason, he says, some long-term value investors believe specialization is the best approach. He offers the example of Benjamin Graham, considered by many to be the grandfather of value investing, who began his career focusing on railways. Columbia Business School professor Bruce Greenwald, writes Reese, advises students to specialize when they start out and then gradually expand their base of knowledge.

According to Reese, “Successful value investors also focus on a company’s balance sheet rather than relying on estimates of future cash flows, which can be flawed.”

Using the Benjamin Graham stock screen on Validea Canada, Reese identifies three top-scoring stocks:

• Senvest Capital Inc. (SEC) is a Montreal-based firm that offers merchant banking, asset management and related services and earns a score of 86 out of 100 according to this screen.
• Canfor Pulp Products Inc. (CFX) is a Vancouver-based pulp and paper company that carries a low price-sales ratio and a reasonable price-earnings ratio.
• Western Forest Products Inc. (WEF), also headquartered in Vancouver, scores highly based on a combination of value and growth models.