"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:


Price Change

Recent Price

Forward P/E Ratio

Deere (NYSE:DE)




PepsiCo (NYSE:PEP)




Marathon Oil (NYSE:MRO)




Schlumberger (NYSE:SLB)




Waste Management (NYSE:WM)




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

A closer look at Marathon Oil
CAPS member LEGMAKER writes of Marathon Oil:

There were plenty of people bearish on [Marathon Oil] this year. Ever increasing oil prices looked to smack this company with decreasing margins on their refining business. As they have refining exposure, they are also an oil exploration company while transporting hydrocarbons. The shares of this company have been pushed down with the other refiners, but the high price of oil helped pull them through as they beat quarterly estimates. 

If this wording seems slightly odd (high price of oil?), it's because this pitch was penned in May 2008. Even so, these same forces accurately outline why some investors find Marathon a value in today's market.

It's easy to rag on Marathon because of its heavy exposure to refining. If you think the price of oil is destined to move higher, refining might not be the pleasant place to be. Since a refiner's main raw material is oil, higher prices can suck the life out of margins.

But as our CAPS friend LEGMAKER hints, the offsetting impact higher oil prices have on other segments shouldn't be overlooked. It's important to note here that exploration and production accounts for far more of Marathon's profits than refining. Have a look:


2008 Profits

Exploration and Production ( E&P)

$2.7 billion

Oil Sands Mining

$258 million

Refining, Marketing, and Transportation

$1.2 billion

Integrated Gas

$302 million

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

Sure, refining is a hefty chunk of profit. But E&P is even more so, and bound to regain its might if and when the price of crude moves higher.

And will it? Some say today's price merely reflects undue speculation that we're totally out of the woods. That may be true. But another key factor here is the value of the dollar. You can have stagnant demand and rising prices if the value of the dollar tanks. And when even cheery ol' permabulls like Warren Buffett start warning of the dollar's inherent weaknesses, its fate seems less than glorious.

More importantly, at all of 8.5 times forward earnings, we have to acknowledge that Marathon's shares already reflect a glut of negativity. Furthermore, this valuation looks stellar in comparison to competitors like ExxonMobil (NYSE:XOM) and Chevron (NYSE:CVX).

Misunderstood. In an industry that could soon boom. And fairly cheap. I'll take that combination any day.

You take it from here
Have your own take on Marathon Oil? More than 140,000 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 doesn't own shares in any of the companies mentioned in this article. PepsiCo is a Motley Fool Income Investor recommendation. The Fool has a disclosure policy.