When I sat down recently with famed value investor Mohnish Pabrai, I got a chance to pick his brain on everything from the short-selling ban to his recent lunch with Warren Buffett. In part one of this series, I'd like to share Pabrai's thoughts on the recent market turmoil, and how he's looking for bargain investments during these tumultuous times. Here's what he had to say.

We're living in very interesting times, but if you look back at the last 100 years and you look at all types of events that have taken place -- the Great Depression, two World Wars, the Korean War, the Vietnam War, many recessions, the oil shock and price controls [of the 1970s] -- the U.S. economy and the global economy have, over time, seen tremendous shocks to the system, and, amazingly, they just continue to chug along.

The key thing that I keep in mind is not to focus on current market shocks, but to realize that over the long haul, if you own stakes in businesses that were purchased at prudent prices, by and large, you'll do just fine.

The only change that the recent turmoil around us has caused is to make me completely ignore the financial-services space -- no long or short bets. I just leave that area alone. I throw it in the "too difficult" pile.

But here's the important part: Because of all the recent turmoil we've seen, there are some incredible opportunities outside the financial-services space. Right now, that's really the place to make some hay!

The biggest thing I've learned from Warren Buffett is, as far as possible, you want your investments to be total no-brainers. If you have to wrap your head around the situation, and think to yourself, "Well, I think housing construction might make a rebound," or, "I think GM (NYSE:GM) and Ford (NYSE:F) will start building better hybrid cars" -- when you start talking like that, you're almost defeating yourself.

For most of the stocks I look at, there's usually nothing that catches my attention -- nothing immediate that says, "I need to drill down here." I would say 99% of the stocks that make it to my list get a pass within two seconds. What I'm looking for is something that blows me away. It should be painfully obvious. I want to be completely blown away with what I see, or else I'm not interested.

I'm always looking at the bottoms list -- stocks that are [trading at] a low P/E ratio, stocks that are trading at a wide discount to book value, stocks that show up on Magicformulainvesting.com, stocks that get written up on Valuinvestorsclub.com -- I'm looking at everything except financials.

The list that interests me the most is the "worst performing stocks" list. Of course, you have to be choosy. Right now, you'll find a whole bunch of financial names that deserve to be there -- Washington Mutual (NYSE:WM), AIG (NYSE:AIG), Fannie Mae (NYSE:FNM), and Freddie Mac (NYSE:FRE) -- they all deserve to be there. Crocs (NASDAQ:CROX) is another that definitely deserves to be there.

Let me give you an example of the type of company I look for. Right now, I'm building a stock position. Cash on its balance sheet represents 90% of its market cap. It has a portfolio of public and private companies that are worth one-and-a-half times the amount of cash the [parent company] has. Just based on those two factors alone, you can buy the company for less than a 50-cent dollar. The third part of the equation is that it's run by people who are phenomenal capital allocators. These guys have banged out 30%-40% returns per year for a long time, and they plan on deploying the cash on the balance sheet.

From my point of view, if you bought this company and it only had the cash on the balance sheet -- nothing else -- you would probably do just fine. Even if they take that cash and make an investment that does very poorly, you probably won't lose money because it has the other assets that exceed the market cap.

If everything works out, it would not surprise me to see this stock trading at five or 10 times its current price in five years. If it doesn't work out the way it's supposed to, I'll still do fine. It's heads I win, tails, I don't lose that much.

Too bad Mohnish won't tell you (or me) the name of the company he's buying right now, but the lesson is as clear as it is basic: During these times of incredible uncertainty, it's as important as ever to keep but a few principles in mind: Keep it simple, have a margin of safety, and stay within your circle of competence.

Stay tuned. We'll have more from my interview with Pabrai later in the week.

For related Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Crocs is a Motley Fool Hidden Gems PayDirt recommendation. The Fool has a disclosure policy.