My friend and colleague Philip Durell has done what many academics view as impossible. His Motley Fool Inside Value newsletter has easily outpaced the S&P 500 for well more than a year. Since inception, subscribers have seen some 11.2% growth from its picks, whereas the S&P 500 has risen only about 7.6%. Philip has surpassed the index by following in the footsteps of generations of market-beating investors, through the straightforward application of value principles.

The concept is simple. Look for a company trading well below its true worth. Buy it, then wait for the stock market to realize it has given you an unfairly low sale price. Once you're an owner, hold on as the business grows over time. If, however, in one of the market's regular mood swings, the company later ends up trading well above its true value, sell. Lather, rinse, and repeat for long enough, and you too will likely soon find yourself well ahead of the pack.

Your extra edge
There's only one catch -- and it's something that you can exploit. Value investing, while a time-tested way to outperform the market, does not and cannot call the absolute bottom in a stock. Instead, it's all about comparing what the stock market thinks might happen to what cold, hard cash says is actually happening. And while the stock market may squawk loudly, cash's call is usually far clearer in the long run. Because of that dynamic tension, companies may still continue to drop even after value investors swoop in for their discounted purchase.

Once a month, Philip lays out the case for two companies to Inside Value subscribers. While both of them look to be trading well below where they should be, the odds are pretty low that they'll both choose the exact instant of publication to bottom out entirely. Yet it's the price at the time of publication that gets tracked in the scorecard. As often happens, the market subsequently moves those value-priced companies further down, making them even cheaper. As a subscriber, you get the inside scoop on two deeply discounted companies a month. You also often get the chance to buy them at an even better price after you've had the chance to verify their worth for yourself.

Real-world examples
Early last year, Philip issued me a personal challenge to find an undervalued company. My response was LandAmericaFinancial Group (NYSE:LFG), which I selected on April 27, 2004. That very day, LandAmerica closed at $41.05. About two weeks later, on May 12, it traded as low as $35.51, down 13.5% in the blink of an eye. Yet 20 months later, LandAmerica changed hands at $63.50. That's up more than 54% from when I found it and up more than 78% from its price two weeks after I pointed out its value.

This is not a one-time fluke, either. Late last December, I uncovered employment verification services provider Talx (NASDAQ:TALX). I liked its price so much that I bought a chunk for myself, at a split-adjusted total cost around $17.13 a share. A couple of weeks later, it bottomed out around a split-adjusted $15.43. At a recent price of $43.07, I've more than doubled my investment in a year, in spite of finding and buying before the low.

I'm not the only one who finds such companies, either. On Aug. 16, 2004, Inside Value subscriber TaiPan07 pointed us toward LCA-Vision (NASDAQ:LCAV), a laser eye surgery center. That very day, it closed at a split-adjusted $13.81. Nine days later, it bottomed out at $13.29, below TaiPan07's price. With a recent price of $49.62, TaiPan07 has seen growth of 259% in about 16 months. The return was even higher for someone who bought in a little more than a week later.

Inside Value subscriber mo pointed out that retailing giant Wal-Mart (NYSE:WMT) looked attractive on Sept. 14 of this year. That stock closed the day at $44.70. Just over a week later, the discount was even larger, with the company trading as low as $42.31. Recently selling for $49.51, Wal-Mart is up more than 10% from mo's price in just about three months, in spite of dropping a bit in the interim.

Inside Value picks are no different
I said that you could beat Philip's market-beating returns and I meant it. Take former selection Omnicare (NYSE:OCR). While it doubled in worth for the newsletter in just over a year, it traded some 8% below Philip's selection price less than a month after he picked it. While that company did stunningly well for him, you could have done even better. You had the luxury of taking your time, critiquing his logic, and analyzing the business for yourself -- and buying in at an even lower price.

You could also have easily lapped Philip's choice of auto parts retailer AutoZone (NYSE:AZO). While the business is currently showing a market-beating return for the Inside Valuescorecard (available to subscribers only -- click here to take a free 30-day trial), that was not always the case. In fact, as recently as this past October, you could have picked up the company for 8% less than Philip did.

Your opportunity still exists
Although the newsletter itself is handily beating the market, not every pick has followed suit. As of this writing, there are still a handful of Inside Value recommendations that are trading below their pick prices. You can review Philip's research, supplement it with your own, and then make the decision for yourself. That, my friend, is how you can beat the guy who is beating Wall Street. Click here to get started. Subscribe today, and you'll also receive a copy of Stocks 2006, the Fool's guide to investing in the year ahead, absolutely free.

At the time of publication, Fool contributor and Inside Value team member Chuck Saletta owned shares of Omnicare and Talx. The Fool has a disclosure policy.