"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.
  • Terrible 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 being valued like total losers.

Have a look:


Price Change

Recent Price

Forward P/E Ratio





Markel (NYSE:MKL)




McDermott International (NYSE:MDR)




PepsiCo (NYSE:PEP)




Western Union (NYSE:WU)




Data from Motley Fool CAPS and Yahoo! Finance, as of July 14, 2009. P/E = price-to-earnings ratio.

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, if you like.

A closer look at Western Union
Money-transfer giant Western Union is a lot like Visa (NYSE:V) and MasterCard (NYSE:MA) -- more of a technology company than a financial company, but often lumped in with the latter. Its real value lies within the massive global network of processing locations that gives it a large moat against competition. In an industry where scale is the single most important factor, it's very difficult to compete with someone like Western Union.

When most people think of this company, remittances to Mexico come to mind. This exposure scares them silly because the jobless rate in the U.S. discourages immigration from Mexico, which should, logically, stifle business.

But Mexico makes up just 7% of total revenue. For consumer-to-consumer transactions, which make up 85% of total revenue, business is fairly diverse:


Percentage of 2008 Revenue

Europe, Middle East, Africa, and South Asia




Asia Pacific


Geographic diversity is a big plus in this economy. Having more robust areas such as India and China to fall back on as growth in the U.S. wanes is a lifesaver. Furthermore, more remote areas of the world don't have nearly the type of banking infrastructure that the U.S. does, making Western Union essential to their economies.

As CAPS member Suiname put it: "Such a large percentage of the world is unbanked, how do those people send/receive money? More often than not, they use Western Union."

Best of all, shares seem fairly cheap at these levels. At about 12 times forward earnings, you're not paying a lot for a company expected to grow north of 12% for the next five years. What makes me think that's cheap? For one, the company's brand name and moat are worth paying up for.

Earnings could also pick up substantially when global growth resumes. And it will. The International Monetary Fund now sees global GDP growth at 2.5% in 2010. That isn't gangbusters, but it isn't the Armageddon scenario we were looking at earlier this year. Growth will resume, and Western Union will be sitting pretty when it does.

Your turn to chime in
Have your own take on Western Union? More than 135,000 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.

Further Foolishness:

Fool contributor Morgan Housel doesn't owns shares in any of the companies mentioned in this article. Western Union is a Motley Fool Stock Advisor pick. Markel and Western Union are Inside Value recommendations. PepsiCo is an Income Investor pick, while Hurco is a Motley Fool Hidden Gems selection. The Fool owns shares of Markel. The Fool has a disclosure policy.