"I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful."
-- Warren Buffett  

Can't argue with that, can you? I don't need to remind you of how much fear is in the market these days. It's a real gut check, but that fear is creating incredible opportunities for investors patient and diligent enough to search for the babies thrown out with the bathwater.

Using our Motley Fool CAPS ranking system's screening tool, I scanned for bargain companies with the following characteristics:

  • Five-star ratings -- the highest our CAPS community offers.
  • Trailing dividend yields of at least 3%.
  • Price-to-book ratios no greater than 1.
  • Dreadful performance over the past 26 weeks. Yes, most stocks meet this condition, but I'm looking for the big crashers. The complete capitulators. The mothers and fathers of all bargains.

Among others, I dug up these five, which have been shredded to such paltry levels that it's hard to keep ignoring 'em:

Company

26-Week 
Price Change

Dividend 
Yield

Price/Book Ratio

2009 Earnings Estimates

Chicago Bridge & Iron (NYSE:CBI)

(84%)

3.1%

0.92

$1.74

Eaton (NYSE:ETN)

(47%)

5.2%

0.91

$4.10

Mueller Water Products (NYSE:MWA)

(79%)

3.1%

0.29

$0.09

Penn West Energy (NYSE:PWE)

(69%)

24.5%

0.44

$0.20

Sadia (NYSE:SDA)

(82%)

3.9%

0.41

$1.33

Data from Motley Fool CAPS and Yahoo! Finance.  Price change from Aug. 29, 2008, through Feb. 25, 2009.

None of these are necessarily recommendations -- just good starting points for you to dig a little deeper. You can rerun an update of this screen yourself, if you like.

The case for Eaton
Shares of industrial manufacturer Eaton have been ravaged over the past year as Detroit's finest -- General Motors (NYSE:GM), Ford (NYSE:F), and Chrysler -- took a turn for the worst. In 2007 (when the auto industry was still breathing), its automotive segment made up 12.8% of Eaton's operating profits.

Yesterday's announcement that GM lost a mind-blowing $9.6 billion in the fourth quarter amid swirling rumors its auditors might issue a "going concern" statement (audit talk for “dead man walking”) surely doesn't help. It probably would be wise for anyone associated with domestic auto manufactures to take their lumps and move on.

Thankfully, Eaton is actually respectably diversified. In 2008, here's how revenue per business segment broke down:

Segment

2008 Revenue

Electrical

$6.9 billion

Hydraulics

$2.5 billion

Aerospace

$1.8 billion

Truck

$2.3 billion

Automotive

$1.9 billion

Source: Capital IQ, a division of Standard & Poor’s.

So while Eaton's business would certainly be affected by Detroit's downfall, it would hardly be a fatal blow for this company. All other segments undoubtedly have their work cut out for them as global economies simultaneously grind to a halt, but the stigma of being attached to the auto industry is almost certainly the driving force behind Eaton's 47% plunge. As CAPS member RetireOrExpire wrote last fall:

The stock has been hammered down because of auto issues, however auto is only about 28% of the company revenue. Even in that 28% [Eaton] supplies parts for both foriegn and domestic players. The loss in revenue if all 3 of the BIG 3 disapeared would be no more than 15%-20%. ... Even still the company has been hammered down 50%. ... Given the other 3/4th of the company deal w/ power supply, switching, and distribution it could benefit from an stimulus09 play.

On the valuation side, things don't look too shabby either. At $36 a share, Eaton trades at about nine times 2009 earnings estimates. Of course, 2009 will be an unduly terrible year for any company in the manufacturing arena. Looking out a little further, average net income estimates bump up to $5.89 per share by 2011.

Of course, no one in their right mind would claim to have perfect two-year foresight, but the overall trend is clear: Eaton is a solid, diversified company stuck in the middle of a brutal global recession and a panic-induced jettisoning of anything automotive-related. As with so many industrial giants, the recent share-price declines are only sensible insofar as short-term thinking guides your investment style. For long-term investors looking to capitalize once global economies start to perk up, Eaton has plenty to offer.

Your turn to chime in
What do you think about Eaton? Are its woes deeper than I made them about to be? More than 125,000 investors use CAPS to share ideas and swap opinions. Click here to check it out and speak your mind. It's 100% free to participate.

For further Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Chicago Bridge & Iron is a Global Gains pick. Sadia is a Motley Fool Hidden Gems recommendation. The Motley Fool is investors writing for investors.