History shows that the stock market has been, and can be beat, by brave folks willing to buck the momentum herd and focus on fundamentals. The roster of those who are capable of delivering and sustaining market-beating investing results includes legends like Warren Buffett, Benjamin Graham, Peter Lynch, and Bill Miller. Time and time again, the folks who can beat index trackers like the iShares S&P 500 Index (AMEX:IVV) are firmly grounded in value-investing principles.

My friend and colleague Philip Durell has studied these masters, their strategies, and their successes. As the lead analyst for Motley Fool Inside Value, Philip's selections have outpaced the market's return (as measured by the S&P 500) by more than three percentage points since the newsletter's inception a little over a year ago. He has done so by recommending attractively priced global stalwarts like industrial conglomerate Tyco (NYSE:TYC), the company behind ubiquitous goods and services like the fire suppression systems in many commercial buildings and ADT Security. He has beaten the market with companies like this, rather than suggesting that subscribers risk their money on a company like search titan Google (NASDAQ:GOOG). While Google may be on a tremendous growth trajectory, its shares have risen well beyond what is justified by the actual levels of cash being thrown off by its business. With its shares priced to perfection, any stumble in its growth trajectory will likely take its stock tumbling down with it.

Why value wins
The reason Philip's selections have bested the market is simple. Like the value greats who came before him, he selects strong companies that are going through short-term tough times. Consider the saga of technology titan IBM (NYSE:IBM). From January through September of 2002, Big Blue's shares were cut just about in half, on fears of a general technology slowdown and word from major business services competitor Electronic Data Services (NYSE:EDS) that earnings would come in nowhere near expectations. Of course, IBM's business recovered along with the rest of the economy, and its shares are now well above those lows. While that particular opportunity came and went well before Inside Value was launched, it's exactly that sort of opportunity that Philip seeks out for subscribers.

It sounds crazy, but such things happen all the time. Last summer, Philip dug up consulting firm Accenture (NYSE:ACN), a former spinoff of disgraced and now defunct accounting firm Arthur Andersen. The firm certainly had a checkered history, and its weakening operating margins at the time had spooked the market even further. In spite of that, Philip made a compelling argument that the business was simply too cheap to pass up. Sure enough, just a few months later, Accenture has easily outperformed the market, returning 27.8% versus the S&P 500's 8.0%.

The market is an emotional roller coaster. When things are going well for a company, its stock can get priced as though the good times will last forever. When things are going poorly, the market often overreacts on the downside, pricing an otherwise solid company as though its days are clearly numbered. Some would say that such irrational panic may be hitting technology retailer RadioShack (NYSE:RSH) right now. The company's long-stagnating operations are facing additional turmoil now as it changes wireless partners from Verizon to Cingular. Difficulty in the conversion has caused its shares to crater. Assuming it works out the kinks in the new system, its business and its stock should be able to recover.

With an objective understanding of the worth of a business, confidence that the market will eventually sort itself out, and enough patience to wait out the process, value investors have beaten the market time and time again. At Inside Value, we're confident that history will repeat itself, and value will once again prevail.

Opportunity knocks
Just after the market closes this afternoon, another issue of Inside Value will be released, and two more companies will join our list of potential market-beating, value-priced investments. Take a 30-day free trial, and be among the first to discover what they'll be. With your trial, you'll also have access to everything we've ever published. You'll be able to take a look at our updated value chart for all of Inside Value's previous picks, and through back issues you can decide for yourself how much value remains in those selections. Click here to begin your free trial and start your journey toward replicating the market-thrashing success of history's greatest value investors. Should you choose to subscribe today, you'll receive a copy of Stocks 2006, the Fool's guide to the investing year ahead, absolutely free.

This article was originally published on Sept. 14, 2005. It has been updated.

At the time of publication, Fool contributor and Inside Value team member ChuckSalettahad no ownership stake in any of the companies mentioned in this article. The Fool has adisclosure policy.