"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 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.
  • Estimates of profitability in 2009.
  • Horrific performance over the past 52 weeks. Yes, almost every stock meets this condition, but I'm looking for the bargain opportunities -- solid companies with great outlooks that are nonetheless valued like losers.

Have a look:


Price Change

Recent Price

2009 Earnings Estimates

Activision Blizzard (NASDAQ:ATVI)




BerkshireHathaway (NYSE:BRK-A)




ConocoPhillips (NYSE:COP)




Diageo (NYSE:DEO)




Philip Morris International (NYSE:PM)




Data from Motley Fool CAPS and Yahoo! Finance, as of April. 30, 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.

"I'm a winner, and I'm a sinner ..."
Companies operating in "sin" industries are often shunned by the investment community. Investment advisors, pension funds, and mutual funds want to tell their clients stories about finding the latest green-energy technology, or the latest biotech blockbuster. There seems to be little glory in telling your investors, "We're long cigarettes and Jack Daniels."

Yet time and time again, sin stocks are where the big money is made. As my Foolish colleague Joe Magyer recently noted about sin stock ExxonMobil (NYSE:XOM): "Many investors' aversion to investing in sin stocks just leaves the stocks that much cheaper for the rest of us. Their loss. Our gain."

Diageo is another good sin-stock example. The liquor manufacturer makes products with brand-name resiliency that would command enormous multiples in any other industry that didn't cause you to dance on tables. Even better, the company is an absolute cash-cow, and sports a hefty international presence. As CAPS member jigar34 recently wrote:

Great cashflow, high dividend yield, and the company holds great brands like Captain Morgan, Smirnoff, Jonnie Walker, Crown Royal, Guiness, Bailey's, etc. As the market recovers and emerging markets get richer, I expect people to drift toward some upscale spirits such as the ones owned by [Diageo]. This is a good long term holding.

At roughly 11 times 2009 earnings, you're not paying much for some of the strongest, most customer-loyal brands in the world. Add in a 4.4% dividend yield, and heck, cheers to this one!

Be greedy when others are fearful ... or when they're morally opposed
Keeping the sin-stock theme rolling, Philip Morris International provides a solid opportunity to exploit three popular areas:

And since it's now free from the chains of former parent Altria Group (NYSE:MO), the domestic litigation fears that plagued the tobacco industry for decades have been quarantined away.

At $36 a share, you're paying barely more than 12 times forward earnings for a company riding a surge in middle-class citizenship in developing nations, a 5.9% dividend yield, a proven ability to raise prices in the face of inflation, and a business model that spews out more cash than it knows what to do with. That kind of opportunity doesn't happen very often, and it probably won't stick around for long.

Your turn to chime in
Have your own views on either of these companies? More than 130,000 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.

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Fool contributor Morgan Housel owns shares of Berkshire Hathaway, Altria Group, and Philip Morris International. Activision Blizzard and Berkshire Hathaway are Motley Fool Stock Advisor recommendations. Berkshire Hathaway is also a Motley Fool Inside Value pick. Diageo is a Motley Fool Income Investor selection. The Fool owns shares of Berkshire Hathaway, and has a disclosure policy.