Cheap stocks that are backed up by solid businesses are as hard to find as a Pete Rose plaque in the Baseball Hall of Fame. But thanks to the level of pessimism ravaging the markets, I believe we can find a few deals out there that can drive our portfolios for years to come.

The greatest investor of our time, Warren Buffett, once said: "Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well." If Warren's right, then right now is a great time to go bargain hunting.

Join me as I use our CAPS screener to unearth some of the most popular stocks among our CAPS All-Stars that are also potentially dirt cheap. Our All-Stars represent the best of the best, ranking in the top 20th percentile of our 115,000-plus investor community, in which we have rated more than 5,500 stocks. So far, there is strong evidence that five-star stocks outperform all others, returning 12% annually since CAPS' inception in late 2006 while one- to two-star stocks have yet to get out of negative territory.

With this in mind, I screened for stocks with:

  • A rating of five stars from our community.
  • At least 1,000 outperform picks.
  • At least 300 All-Star outperform picks.
  • Market caps of more than $1 billion.
  • Trading within 10% of their 52-week lows.

Company

Fools Saying Outperform

All-Stars Saying Outperform

% Above 52-Week Low

Market Cap (billions)

3M (NYSE:MMM)

3,072

945

9.26%

$49.5

America Movil (NYSE:AMX)

1,522

507

8.53%

$87.3

Corning (NYSE:GLW)

2,592

611

9.78%

$33.2

Duke Energy (NYSE:DUK)

1,145

327

6.02%

$22.4

Foster Wheeler (NASDAQ:FWLT)

1,227

333

4.48%

$6.7

Southern Copper (NYSE:PCU)

3,575

1,037

6.77%

$20.8

XTO Energy (NYSE:XTO)

1,840

493

9.91%

$25.7

Source: Motley Fool CAPS as of 8/18/08 and Yahoo! Finance. Market cap as of 8/19/08.

Have these loved stocks lost their luster, or are they just caught up in a pessimistic market? Either way, I'm presenting them as a list for further research. Let's see what some of our All-Stars have to say about several of them.

Back in early June, CAPS All-Star DemonDoug highlighted 3M's diversified revenue stream and products:

I have admired 3M for many years, and I am also a believer in blue chip dividend achieving stocks with strong branding and value. Working in health care, I also know that 3M supplies a lot of the items that are used every day in clinics and hospitals all over the country, and my assertion is that in any potential downturn, health care will not be cut. 3M also has strong products in your staple of things around the house, for example tape and glue. Finally, as a multinational global conglomerate, 3M has a lot of sales outside of the US, where most of the growth in the world will be occurring over the next 10 years.

About the same time, HatchingPlans was alerting us that shares of Latin American wireless service provider, America Movil, may be selling at a discount:

About a month ago they plummeted because of a missed earnings report. Lots of people got unnecessarily scared and got out, giving a solid price. Well, they missed that earnings report because they are upgrading their networks. This is a good thing. At this point, they should have a more powerful wireless EDGE network than AT&T or Verizon... And with all these talks of an iPhone start-up, that would mean exclusive rights to sell a hot phone in a hot market, with probably the best wireless Internet network in the world.

Also in June (it was a good month), CAPS All-Star ddberg kept it simple with this pitch for Corning:

Love what they're doing and the segments in which they operate. One of those large blue chips that I don't pay enough attention to because, well, it's a large blue chip. Big mistake on my part. These guys have their hands deeply in LCD screens (big and small), fiber optics, solar and other alternative powers, etc, and are leaders across the board. Just a great, innovative, well-run company.

Recently CAPS All-Star Smittyh brought us up to speed on the state of Duke Energy's balance sheet:

Duke has returned to doing what they do best, making electricity. The balance sheet looks good, but if you consider that their nuclear plants are not shown at full value because they are almost fully depreciated, it looks much better. Duke is becoming a cash cow. They have substantial debt, but they still own 1/2 of Crescent and their nuclear power has a cost of $0.03/KW to produce. They are able to sell most of this power to customers rather than wholesale it to other power companies. All this and they are paying a 5% dividend.

Are these stocks really cheap?
The only way to know the answer to that question is to do your own due diligence. While a screen is a useful tool for finding undervalued stocks, it's not enough on its own. Take advantage of the current market's mood swing and try to unearth your own fallen angels at Motley Fool CAPS.