"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

Activision Blizzard (NASDAQ:ATVI)




Arch Coal (NYSE:ACI)




Berkshire Hathaway (NYSE:BRK-A)




Schlumberger (NYSE:SLB)




NYSE Euronext (NYSE:NYX)




Chesapeake Energy (NYSE:CHK)




Procter & Gamble (NYSE:PG)




Data from Motley Fool CAPS and Yahoo! Finance, as of Sept. 13, 2009.

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

A closer look at Activision Blizzard
Do recession-proof industries exist? Sure. Consumer staples. Health care. The government. The Mafia. Maybe a few others.

Some companies can actually benefit from recession-led shifts in consumer behavior. Activision Blizzard, some feel, could be one of them. As CAPS member finfanwoman10 wrote earlier this year:

The gaming industry has proven to be recession proof. Activision is set to "take off" and they have been around for a long time. Now that Guitar Hero that Activision makes is available for the Wii it is guaranteed to entertain you for hours and hours. ... As more and more people are cutting back on spending money, gaming is becoming more and more popular as people are going out less and spending a lot more time at home and saving money AND having a great time while doing so. I like Activision and believe it to be a good buy.

Activision Blizzard CEO Robert Kotick had similar words in an interview with The Wall Street Journal last fall:

If you talk to people about the history of the games business during economic downturns, they'll tell you that it's a recession-proof industry. I think what's happening is that people go out and spend the 50 or 60 dollars on Guitar Hero and they end up spending so many more hours playing it that they don't have a need to go out to the movies, or as much of a need to watch cable television.

Now, some of these theories have been challenged by stubborn facts. Video game sales fell 15% in August compared to last year, the sixth consecutive month of year-over-year declines.

So maybe we're talking mildly recession-resistant, rather than recession-proof. Fair enough. But any negative way you want to spin that can become nearly irrelevant to Activision Blizzard from an investment point of view, when you consider that ...

... it's cheap
Shares currently trade at about $12. Back out the $2.22 in cash per share it holds on its balance sheet -- which is fair for this debt-free company -- and you get to something around 12 times 2010 earnings. That doesn't make it the cheapest stock in the market, but it ain't bad for a company with a cult following and a recurring revenue stream, with legions of players paying monthly fees to immerse themselves in World of Warcraft. As CAPS member riffle10 writes:

Three words: WORLD OF WARCRACK. They have structured this game in a delightfully similar fashion to a drug-dealer's business plan with the caveat that you pay a premium for the title up front. then it's $15 a month from there on. The game is addictive and cannot be beaten (read: it doesn't end) and for some is a real means of social interaction. Toss this in with a huge suite of other world-beating titles in a rapidly expanding industry and there's alot to like about [Activision Blizzard]

You take it from here
Have your own take on Activision Blizzard? 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.

For related Foolishness:                                                                        

Fool contributor Morgan Housel owns shares of Berkshire Hathaway and Procter & Gamble. NYSE Euronext is a Motley Fool Rule Breakers selection. Activision Blizzard and Berkshire Hathaway are Stock Advisor picks. Berkshire Hathaway and Chesapeake Energy are Inside Value recommendations. Procter & Gamble is an Income Investor pick. The Fool owns shares of Procter & Gamble, Berkshire Hathaway, and Chesapeake Energy, and has a disclosure policy.