Many value investors preach the virtue of waiting for fat pitches. But how do you find a fat pitch? In baseball as in investing, you've got to seek situations that play to your strengths.

Know your strike zone
While investors (myself included) seem to understand the value of staying within their circles of competence, we still stray beyond them. Suppose that your dentist starts pitching you some obscure mining stock in the middle of your six-month checkup. Wouldn't you rather hear your dentist's opinion on dental companies such as Henry Schein and Patterson Companies -- firms far closer to your basic dentist's strike zone?

Sometimes, fat pitches lie right under your nose. In his must-read books, legendary portfolio manager Peter Lynch noted that his successful investments in L'eggs (now part of Hanesbrands (NYSE:HBI)) and Taco Bell (part of Yum! Brands (NYSE:YUM)) came from a tip from his wife about nylons, and his own penchant for delicious burritos. Of course, he did a lot more due diligence than that, but Lynch nonetheless chose to invest in companies he could easily understand.

Know what's not in your strike zone
I admire poker legend Phil Hellmuth because he knows when to fold, picking his spots with incredible care. Great investors should exercise similar caution. If you can't quickly and clearly describe how a company makes money, and why you think it's undervalued, it's probably beyond your circle of competence.

A superb post on Jeff Matthews' blog describes how Warren Buffett could sum up his investment in General Foods, now part of Kraft (NYSE:KFT), in two words: "shelf space." General Foods' competitive advantage in providing popular, well-stocked goods to grocery stores meant that the company would continue to dominate and earn strong returns on capital.

Swing for the fences
Besides Buffett, many savvy hedge-fund managers, including David Einhorn, Glenn Greenberg, Mohnish Pabrai, and Eddie Lampert, concentrate their holdings in a few ideas. Why would these investors, some of whom control billions of dollars and employ teams of the world's finest analysts and traders, choose relatively few holdings? Perhaps it's because only a handful of great opportunities present themselves every year, and capital should be jealously guarded until those moments. After all, why put money into a weak stock when you could save it for one of your top 10 best ideas?

Of course, to some extent, investors need to diversify. But when taken too far, diversification can excessively dilute your best ideas. That's why many great investors patiently stand at the plate for a long time -- sometimes even years -- before knocking the cover off a fat pitch.

And the windup ...
The best part about investing is that no strikes are called. If you don't like Income Investor pick US Bancorp (NYSE:USB) and Wells Fargo (NYSE:WFC), two of the nation's finest banks, at around 13 times trailing earnings, you don't have to buy them. What about Capital One (NYSE:COF), a credit card and banking company with a great long-term track record but short-term struggles, at about nine times forecasted 2007 earnings (if you exclude the mortgage shutdown charge)? Or perhaps Torchmark (NYSE:TMK), a top-of-the-line life insurer with a very steady growth rate, trading at 12 times earnings? I'm watching all of the companies mentioned above very intently, waiting for Mr. Market to throw me a big, fat pitch.

Since we all have different strike zones, you'll have to decide for yourself what constitutes a fat pitch. But if you exercise enough discipline and do your homework, you'll know it when you see it -- and hopefully hit a few home runs.

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Fool contributor Emil Lee is an analyst and a disciple of value investing. He doesn't own shares in any of the companies mentioned above. Emil appreciates your comments, concerns, and complaints. The Motley Fool's disclosure policy bats 1.000.