Your Once-in-a-Lifetime Investing Opportunity

"Panic" might be too weak a word for what we've been going through. Beyond the substantial shocks that stocks have sustained, the far larger lending market has seized up as well. Banks don't want to lend to each other, much less those of us out here in the real world, and the bond markets remain off-limits to all but the strongest of borrowers.

And all of that has left everyone terrified. The long-term future simply doesn't matter all that much to a company that risks oblivion in the next week if it can't roll over its maturing debt or cover tomorrow's margin call.

The companies hit hardest by this mess were built on the presumption of easy, cheap, and unlimited credit. Homebuilders such as MDC Holdings (NYSE: MDC  ) and KB Homes (NYSE: KBH  ) are in a world of hurt. In addition, even the strongest automobile titans, including Toyota, are feeling the impact of the credit crunch, while weaker ones like Chrysler teeter on the edge of collapse. But investment banks and financial institutions -- the largest and fiercest players on Wall Street -- were literally ground zero for this implosion.

The list of companies brought down by the implosion -- Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac -- includes some of the most notable names on Wall Street. The list of companies struggling to survive the economic downturn grows longer by the day. And that's creating a once-in-a-lifetime investing opportunity -- for you.

It's your turn
There are unbelievable bargains available now, the likes of which we haven't seen since the days of Benjamin Graham. Under less unusual circumstances, Wall Street's financial wizards would be leveraging themselves to the hilt to take advantage of the market's current conditions. But with their funds cut off, redeemed, or diverted into mere survival, they're forced to sit on the sidelines, rendered completely unable to act.

That's where you come in. As long as you have the patience to wait out the volatility, you can buy those very same bargains (without the leverage) and be richly rewarded when things return to normal.

The country, the stock market, and the strongest companies of the era survived the Great Depression. We'll get through this mess, too. Much the way Benjamin Graham and his protege Warren Buffett did after past catastrophes, the superinvestors of this generation will make their fortunes buying on the heels of this one.

Where to play
Even if you don't aspire to be the next Graham or Buffett (and don't have $5 billion sitting around with which to invest in a struggling company), there are plenty of bargains available to you right now.

But be careful out there -- not every company that has fallen is legitimately cheap. We're in the throes of a global economic rout, after all, and many companies deserve their slashed share prices.

Those whose prices have dropped as a result of forced selling or general market malaise, on the other hand, are the most likely to reward their shareholders for holding on through this mess. They typically have

  • Strong balance sheets,
  • Reasonable or cheap valuations, and
  • Moats protecting their core businesses.

Companies like these, for instance:

Company

Moat

Value proposition

IBM (NYSE: IBM  )

Unparalleled global reach in end-to-end technology hardware / software / implementation / consulting / services.

Earnings easily cover interest payments, trading for 11 times forward earnings.

Coca-Cola (NYSE: KO  )

Rated world's most valuable brand by Interbrand, generally viewed as an affordable indulgence

Well-capitalized, trading for 12 times forward earnings.

Abbot Labs (NYSE: ABT  )

Patent protection + FDA hurdles for competition assures profitability for a definite period, strong pipeline protects future outlook.

Minor debt, trading for 12 times forward earnings.

United Technologies (NYSE: UTX  )

Has military contracts, which are largely recession-resistant, large footprint in HVAC, power, & other long-cycle equipment

Low debt levels, trading below 11 times forward earnings.

Kraft (NYSE: KFT  )

Basic foods and drinks (like Maxwell House Coffee) are largely recession-resistant, and Kraft's brands lead in many segments.

Trading for 11 times forward and trailing earnings, generated $2.8 billion in free cash flow last year.

Although these companies are affected by the U.S.'s recession and the general tightening of consumer credit, their basic businesses are solid. Solid businesses, clean balance sheets, and cheap prices compared to intrinsic value mean these are the types of opportunities you should be taking advantage of right now -- while you still can.

This won't last forever
In ordinary times, companies this strong would not be available at such attractive prices. These deals are available only because the global financial meltdown has knocked out so very many of the institutional investors who would ordinarily bid these companies up much higher.

If you want to pay bargain-basement prices for some of the strongest businesses around, this is when you should pounce. It's not easy to buy when everyone is panicking, but it's precisely how generations of successful value investors have made their fortunes.

At Motley Fool Inside Value, we're taking advantage of the brief window we've been given -- and we're excited to buy companies like these at such reasonable prices. You can get a free, 30-day trial, with all of our recommendations but no obligation to subscribe, just by clicking here.

This article was originally published on Dec. 3, 2008. It has been updated.

At the time of publication, Fool contributor and Inside Value team member Chuck Saletta did not own shares of any company mentioned in this article. MDC Holdings is a Motley Fool Hidden Gems recommendation. Kraft is a Motley Fool Income Investor selection. Coca-Cola is an Inside Value recommendation.You don't need to cross a moat to see the Fool's disclosure policy.


Read/Post Comments (5) | Recommend This Article (21)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 07, 2009, at 8:00 AM, pondee619 wrote:

    "Your Once-in-a-Lifetime Investing Opportunity"

    "This article was originally published on Dec. 3, 2008. It has been updated."

    Are you kidding me?! My once in a life time investing opportunity happened twice in four months.

    Outstanding.

  • Report this Comment On April 07, 2009, at 8:31 AM, pondee619 wrote:

    Your Once-in-a-Lifetime Investing Opportunity

    Your Once-in-a-Lifetime Investing Opportunity. By Chuck Saletta December 3, 2008 | Comments (16). Recs. 68. "Panic" might be too weak …

    www.fool.com/investing/value/2008/12/03/your-once-in-a-lifet... - December 3, 2008

    Your Once-in-a-Lifetime Investing Opportunity

    Your Once-in-a-Lifetime Investing Opportunity. By Chuck Saletta January 8, 2009 | Comments (0). Recs. 13. "Panic" might be too weak …

    www.fool.com/investing/value/2009/01/08/your-once-in-a-lifet... - January 8, 2009

    Your Once-in-a-Lifetime Investing Opportunity

    Your Once-in-a-Lifetime Investing Opportunity. By Chuck Saletta February 12, 2009 | Comments (0). Recs. 17. "Panic" might be too weak …

    www.fool.com/investing/value/2009/02/12/your-once-in-a-lifet... - February 12, 2009

    Seems my once in a lifetime opportunity comes along about once a month. Lifetimes aren't as long as they used to be.

  • Report this Comment On April 07, 2009, at 11:55 AM, evilrage wrote:

    I'm used to the Fool's habit of recycling articles and changing some things around here and there to make it slightly more relevant - sometimes yes, it does seem silly. In this case, though, I think the point is pretty clear - your opportunity started in December and the window is still pretty much open. A once-a-month reminder of 'hey, stocks are cheap and now's a good time to buy' isn't a bad thing.

  • Report this Comment On April 07, 2009, at 12:39 PM, pondee619 wrote:

    It is just lazy writing. Cut and paste the same article and put different company names in a table. Run a screen and paste companies, be sure to add nothing worthwhile except:

    "You can get a free, 30-day trial, with all of our recommendations but no obligation to subscribe, just by clicking here."

  • Report this Comment On April 09, 2009, at 3:34 PM, evilrage wrote:

    Oh, I completely agree there. Some more real, actual content would be great. Maybe even something where the entire article isn't a pitch for a specific service.

    That might even make more sense, given that the only service they have that's returning positive is Stock Advisor. Yes, maybe they're all outperforming the S&P500, but I'm interested in real money, not just beating an index.

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