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 5,400 stocks. So far, there is strong evidence that five-star stocks outperform all others, returning 12% annually since CAPS' inception in 2006, whereas 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 20% of their 52-week lows.

Company

Fools Saying Outperform

All-Stars Saying Outperform

% Above 52-Week Low

Market Cap (billions)

Chesapeake Energy (NYSE:CHK)

5,128

1,196

15.1%

$23.4

EMC Corp. (NYSE:EMC)

2,756

522

6.1%

$27.0

Johnson & Johnson (NYSE:JNJ)

8,863

2,358

11.5%

$193.8

NYSE Euronext (NYSE:NYX)

2,234

478

9.8%

$10.4

Procter & Gamble (NYSE:PG)

4,498

1,321

14.5%

$207.9

Terex (NYSE:TEX)

1,139

321

7.8%

$3.2

UnitedHealth (NYSE:UNH)

2,653

781

18.4%

$31.1

Source: Motley Fool CAPS as of 9/25/08.

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.

Last month, CAPS All-Star EcklandCapital told us that Chesapeake Energy may have a somewhat hidden asset that the market has neglected to value:

[Chesapeake Energy] is an immensely cheap stock as the market does not understand the value of their newly acquired Haynesville acreage and is overly pessimistic about [natural gas] prices. [Chesapeake] is currently priced for $6 NG ex its Haynesville position which is worth 50% of market cap.

Recently, CAPS All-Star SafeAndCheap let us know that you can catch some ZZZs -- always an important consideration -- with Johnson & Johnson:

I don't like investing in individual pharma companies as a rule: too much risk in any individual company. J&J is the exception; it's a bit like owning a pharma ETF. Plus it's one of the world's better run companies. You won't hit a home run, but with reinvested dividends, you'll earn a respectable return over time. Sleep at night with J&J.

In July, CAPS All-Star DemonDoug recommended a stock whose products are staples in most households:

Products from [Procter & Gamble] in my bathroom: Mach 3 razor, Crest toothpaste, Vicks vapo rub. I occasionally have pringles in my food closet, and duracell is my battery of choice. Things i don't have but you might are always, head and shoulders, pantene, oil of olay, tide, dawn, downey, pampers. This company has been around for 171 years. That means it didn't just survive the depression and 2 world wars, but also multiple depressions in the 1800s....I believe at least 50% of all sales are outside the US and this number is likely higher.

Back in July, CAPS All-Star TMFDeej introduced us to a nice value play in infrastructure with Terex:

The manufacturer of construction and mining equipment has been firing on all cylinders lately. It's earnings were up 40% last quarter and its EPS ($2.32) beat analysts' estimates by a whopping $0.32. That's some amazing growth for a company that is currently trading at an estimated 7 times its 2008 earnings.                        

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.

On Oct. 7, 2008, Fool Co-Founder David Gardner and his Motley Fool Pro team will invest $1 million in a portfolio designed to help you make money in any market. In the coming weeks, the team, relying heavily on proprietary CAPS "community intelligence" data, will establish long and short positions in a broad range of securities, including common stocks, publicly traded put and call options, and exchange-traded funds (ETFs). To learn more about Motley Fool Pro and to receive a private invitation to join, simply enter your email address in the box below.

Bryan White does not own shares in any company mentioned in this article, and he doubts the likelihood of ever seeing a Pete Rose plaque in the Hall of Fame. Johnson & Johnson is a Motley Fool Income Investor recommendation. UnitedHealth Group and Chesapeake Energy are Inside Value picks. NYSE Euronext is a Rule Breakers recommendation. UnitedHealth Group is a Stock Advisor pick. The Fool owns shares of UnitedHealth Group and Terex. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy would make Peter Uberroth proud.