The facts about Enron's legendary tumble are now well known, but it wasn't always so. After all, Ken Lay and Jeff Skilling duped hundreds of Wall Street analysts. Enron was dubbed "America's Most Innovative Company" by Fortune. Even our own resident curmudgeon Bill Mann -- perhaps the most skeptical investor we know -- called Enron "revolutionary" back in 2000.

But Lay and Skilling weren't always doing the duping. During their company's fast rise, a few savvy businessmen got the best of them.

A $40 million bargain
Richard Kinder was supposed to become Enron's CEO when Ken Lay stepped down, but something went awry. Though no one knows exactly what happened (there are several theories), Kinder didn't become CEO, and he quit Enron in 1996.

But he didn't walk away empty-handed. With business partner Bill Morgan, Kinder bought some pipelines from Enron for $40 million. Pipelines were a part of Enron's old-economy business, and Lay abhorred them.

How can $40 million be a bargain? Well, Kinder Morgan -- the company Kinder and Morgan started from Enron's discard pile -- is worth more than $14 billion today. What's more, Kinder is now taking his entire company private, with some help from Goldman Sachs, AIG, and the Carlyle Group, for $107.50 per share -- likely because he believes it's still undervalued.

More Enron stupidity
Richard Kinder wasn't the only investor to fleece Enron. Mark Papa, CEO of EOG Resources -- EOG is short for "Enron Oil & Gas" -- holds that distinction as well.

Papa ran EOG when it was an Enron subsidiary. Lay and Skilling wanted to continue moving Enron out of the old economy in 1999, which meant getting rid of the oil and gas exploration business. Papa believed that exploration and development was exactly the business to be in, so he bought Enron's stake in EOG -- minus its operations in China and India -- for $600 million in cash.

The exchange has been laughably one-sided: Enron flailed, EOG Resources flourished. Today, the business is worth more than $15 billion. Like Richard Kinder, Mark Papa quietly built a fortune from Enron's castoffs.

One man's trash ...
The secret to Kinder's and Papa's success is simple:

  1. Buy valuable assets for less than they're worth.
  2. Be patient.
  3. Profit.

As stock investors, purchasing a small part of a business, we'd do well to heed these precepts. It's no coincidence that Enron wanted to sell its old-economy pipeline assets for pennies on the dollar to concentrate on e-commerce and energy trading instead. That's what always happens in the market -- investors discount the old in favor of the new.

Don't let that happen to you. Follow the examples set forth by Kinder and Papa: Look for value in discard piles or boring and distasteful businesses, keep your new-economy biases in check, and be a patient, long-term investor. Perhaps like them, you can make a fortune in the stock market, too.

Consider this: In 2000, you could have purchased overlooked businesses such as EOG, Arch Coal (NYSE:ACI), Lennar (NYSE:LEN), and Walter Industries (NYSE:WLT) at or near historical lows, even as investors bid the prices of Enron, Skyworks Solutions (NASDAQ:SWKS), Corning (NYSE:GLW), and RF Micro Devices (NASDAQ:RFMD) to record highs. The "new" economy would power these companies to extraordinary growth, the logic went. Today, Enron is bankrupt, and those companies are down 40% or more. What about EOG, Arch Coal, Lennar, and Walter Industries? They've each more than quadrupled since then. Caught up in the new economy, Wall Street started treating these old-economy firms as if they were trash. (They weren't.) There's a big difference -- and as Kinder and Papa proved, there's a big opportunity in that difference.

The Foolish bottom line
This strategy is called value investing, and it's precisely how Warren Buffett built Berkshire Hathaway into a boring empire of furniture, insurance, RVs, and soft drinks -- earning investors greater-than-20% annual returns along the way. This strategy is also what Fool value guru Philip Durell uses in his Inside Value service to help members beat the market.

It's a simple formula, but it takes discipline, patience, and the ability to see value where others don't. That's where Philip can help you build your own fortune. Click here to learn more about his strategy and his favorite value opportunities in today's market.

This article was originally published on June 21, 2006. It has been updated.

Neither Tim Hanson nor Brian Richards owns shares of any company mentioned in this article. No Fool is too cool for disclosure.