"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? Despite the recent rally, fear still permeates the economy. 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 -- an invariable product of crashing markets.

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 the year ahead.
  • Terrible performance over the past 52 weeks. Yes, almost every stock meets this condition, but I'm looking for the bargain opportunities. Not stocks that have simply fallen in price, but stocks that are cheap.

Have a look:

Company

52-Week 
Price Change

Recent Price

Forward P/E Ratio

Agrium (NYSE:AGU)

(46%)

$47.21

8.26

Canadian Natural Resources (NYSE:CNQ)

(32%)

$57.49

11.4

Diana Shipping (NYSE:DSX)

(56%)

$13.02

8.77

National Oilwell Varco (NYSE:NOV)

(53%)

$36.62

12.2

Procter & Gamble (NYSE:PG)

(27%)

$52.45

12.6

Data from Motley Fool CAPS and Yahoo! Finance, as of Aug. 18, 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.

A closer look at Procter & Gamble
Procter & Gamble, like most consumer stocks, is all too easy to bash these days. Yet despite its shortcomings, I'm as firm a believer as ever that this company is both misunderstood and undervalued at today's price.

The bearish argument is both straightforward and accurate: P&G enjoyed decades, if not generations, of growth as increasing living standards promoted an upgrade to premium household products. This actually created paradoxical pricing power: Consumers viewed premium-priced products as far superior items. Hence, higher-priced items were, more often than not, more sought after than the cheapos. People just wanted the best.

That all ended sometime last year, when financial fallout instilled a rush to frugality like never before. As consumers scrambled to pinch as many pennies as they could, cheap, store-brand names from places like Costco (NYSE:COST) became dangerously competitive. "Consumers will be switching away from PG brands to more generic offerings as budgets get tight" writes CAPS member bjltarh33l.

True. Accurate. Spot-on. Undebatable. But stopping there ignores two crucial points.

1. Management isn't oblivious
Times are changing, and management knows this. In perhaps one of the most dramatic moves of this company's history, P&G rolled out a Tide Basic line, which leverages its Tide detergent brand, but scales down with a no-frills version that costs 20% less than the original. This "scaling down" strategy isn't unique to Tide. As the Wall Street Journal recently wrote:

P & G is trying to stretch its premium brand names across a wider range of prices. In a single store, shoppers can choose from what P & G executives call a "portfolio," including Olay skin creams that run from $7 to a kit for $68 and versions of Crest toothpaste that range from $2.25 to $4.25. Pampers Baby Dry diapers sell for about 20% less than Pampers Cruisers.

Some might say this is a sign P&G has lost its edge. Others will say it's a sign it's adapting to reality. Long term, the latter is all that's important. Companies that cling to the past and fail to fess up to reality are the ones that end up fading into nothingness. Ask General Motors.

2. Its price reflects it
Poking holes at slowing-growth trends makes sense when a stock is priced for perfection. This is the exact argument that keeps me away from Visa (NYSE:V). If P&G were trading for its historical average of over 20 times earnings, the bears would have something to run with.

But today, P&G shares trade for no more than 12 times forward earnings. How much premium growth is that pricing in? Something close to nothing, I'd say. And how much growth might resume when economies stabilize, consumers regain confidence, and the power of P&G's brand names take off again? Something far more than nothing, I'd say. And that, fellow Fools, creates value.

Your turn to chime in
Have your own take on Procter & Gamble? 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.

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Fool contributor Morgan Housel owns shares of Procter & Gamble. Costco Wholesale and National Oilwell Varco are Motley Fool Stock Advisor recommendations. Costco Wholesale is a Motley Fool Inside Value selection. Procter & Gamble is a Motley Fool Income Investor recommendation. The Fool owns shares of Procter & Gamble and Costco Wholesale, and has a disclosure policy.