Don't Underestimate These Great Stocks

Ignore the naysayers -- buying and holding stocks for the long haul can be a great way to build wealth. But while it's vital to place your money in high-quality companies, you must also make sure that you're buying those companies at the right price.

Even the most wonderful companies can appreciate in value to the point where they're way, way too expensive compared to their true worth. At that point, it can make sense to sell and move your money into something trading for a more tantalizing price.

Fund managers Bill Nygren and Kevin Grant, of the respected Oakmark Fund (OAKMX), recently did exactly that. In their third-quarter letter to shareholders, they explained that they recently bought shares of AFLAC (NYSE: AFL  ) , the Japan-focused supplemental insurance company, after having owned it previously and sold in early 2008. Nygren and Grant never stopped believing that AFLAC was a high-quality company; only its valuation changed. They sold when the company's price-to-earnings (P/E) ratio neared 20, and then bought again when the P/E approached 10.

Low P/Es ahoy!
Fools should take a similar approach to investing, seeking solid companies with low valuations. With P/Es well below their five-year averages, the following companies may be bargains:

Company	Recent P/E	Five-year Avg. P/E
Teva Pharmaceutical (Nasdaq: TEVA  )	19	34
American Oriental Bioengineering (NYSE: AOB  )	7	16
China Security & Surveillance Technology (NYSE: CSR  )	6	12
Micron Technology (Nasdaq: MU  )	5	20

Data: Morningstar.com.

Despite their attractive characteristics, these companies all have certain factors that are depressing their stocks. Teva Pharmaceutical is a top player in the generic drug business, poised to benefit as many blockbuster drugs lose their patent protection in coming years. But it's been fighting a battle of its own to protect its proprietary drug Copaxone. China Security stands to grab a lot of business in a rapidly growing nation with a rising need for electronic security, but it's also facing competition from much bigger companies such as General Electric (NYSE: GE  ) and United Technologies (NYSE: UTX  ) .

American Oriental Bioengineering is offering both pharmaceutical and traditional health-care products to China, but some investors doubt its managers' apparently flaky capital allocation decisions. Investors like Micron Technology's recent momentum and low valuation, but some worry about a weakening chip market and slowing sales.

No stock offers a performance guarantee, but by seeking attractive companies with significant margins of safety, you can give your portfolio a little extra protection.

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