With the mortgage market collapsing, liquidity drying up, and even the revered Harvard endowment revealing shocking losses, who in their right mind would think that now is a good time to buy stocks?

Frankly, I do ... and so does Legg Mason's Bill Miller.

Bill Miller, market beater
If you don't know Bill Miller, he's the famed money manager who beat the market for 15 consecutive years as the head of Legg Mason Value Trust (LMVTX). And while the fund trails the market year-to-date as the result of overexposure to housing and underexposure to energy, Miller remains a bull.

In fact, Miller would probably say my colleague Bill Barker understated the case when he called now the best buying opportunity in 12 years; Miller says stocks are the cheapest they've been since January 1991 (16-plus years)!

That makes now, in Miller's words, "a pretty good time to be a buyer of stocks!" After all, "lower stock prices mean values are better and future rates of return are higher."

The time to be buying
What's the method to Miller's madness? He sees a steep decline in the market (the likes we've not seen since 2002) coupled with low-ish valuations. Just take a look at what's happened to some bellwether stocks:


Return Since July 2

Current P/E

Five-Year Average P/E





Goldman Sachs (NYSE:GS)




Home Depot (NYSE:HD)




Kohl's (NYSE:KSS)




Wal-Mart (NYSE:WMT)




TD Ameritrade (NASDAQ:AMTD)




Texas Instruments (NYSE:TXN)




*Normalized. Data courtesy of Capital IQ.

With prices like that, it's easy to see why a long-term investor like Miller ends his most recent commentary by writing, "I began the year quite bullish and remain so."

Stocks you should buy
Of course, not every stock with a low price-to-earnings ratio that's declined in recent weeks will come roaring back -- and some of those trailing multiples will rise as earnings contract. But there are cheap stocks out there. If you'd like a list of worthy candidates, you can join our Motley Fool Stock Advisor investing service free for 30 days.

Fool co-founders David and Tom Gardner focus on finding great businesses trading at compelling prices. And if you still doubt whether now really is a good time to buy stocks, consider that David and Tom started their service in the bear market of 2002. The low valuations at the time have supercharged their returns, helping them beat the market by nearly 40 percentage points on average.

Click here to see what they're recommending in Stock Advisor today. There is no obligation to subscribe. 

Tim Hanson does not own shares of any company mentioned. JPMorgan is a Motley Fool Income Investor recommendation. Wal-Mart, Legg Mason, and Home Depot are Inside Value picks. The Fool's disclosure policy began the year quite thorough and remains so.