"Panic" might be too weak a word for what we've been going through. It's not just the way the stock market has been affected -- the far larger lending market seized up as well. Banks don't want to lend to each other, much less those of us out here in the real world, and the bond markets remain off-limits to all but the strongest of borrowers.

And all of that has left everyone terrified. The long-term future simply doesn't matter all that much to a company that risks oblivion in the next week if it can't roll over its maturing debt or cover tomorrow's margin call.

The companies hit hardest by this mess have been the ones that were built on the presumption of easy, cheap, and unlimited credit. Homebuilders like D.R. Horton (NYSE:DHI) are in a world of hurt. In addition, even the strongest automobile titans like Honda are feeling the impact of the credit crunch while the weaker ones like General Motors (NYSE:GM) teeter on the edge of collapse. But it was investment banks and financial institutions -- the largest and fiercest players on Wall Street -- that were literally ground zero for this implosion.

The list of companies brought down by the implosion -- Bear Stearns, Lehman Brothers, Fannie Mae, Freddie Mac -- includes some of the most notable names on Wall Street. The list of companies struggling to survive the economic downturn grows longer by the day. And that's creating a once-in-a-lifetime investing opportunity -- for you.

It's your turn
There are unbelievable bargains available now, the likes of which we haven't seen since the days of Benjamin Graham. Under less unusual circumstances, Wall Street's financial wizards would be leveraging themselves to the hilt to take advantage of the market's current conditions. But with their funds cut off, redeemed, or diverted into mere survival, they're forced to sit on the sidelines, rendered completely unable to act.

That's where you come in. As long as you have the patience to wait out the volatility, you can buy those very same bargains (without the leverage) and be richly rewarded when things return to normal.

The country, the stock market, and the strongest companies of the era survived the Great Depression. We'll get through this mess, too. Much the way Benjamin Graham and his protege Warren Buffett did after past catastrophes, the superinvestors of this generation will make their fortunes buying on the heels of this one.

Where to play
Even if you don't aspire to be the next Graham or Buffett (and don't have $5 billion sitting around with which to invest in a struggling company), there are plenty of bargains available to you right now.

But be careful out there -- not every company that has fallen is legitimately cheap. We're in the throes of a global economic rout, after all, and many companies deserve their slashed share prices.

Those whose prices have dropped as a result of forced selling or general market malaise, on the other hand, are the most likely to reward their shareholders for holding on through this mess. They typically have

  • Strong balance sheets,
  • Reasonable or cheap valuations, and
  • Moats protecting their core businesses.

Companies like these, for instance:



Value proposition

Philip Morris International (NYSE:PM)

Despite knowing better, people still smoke.

Forward P/E below 11, total debt below 1/2 year's revenue

Goldman Sachs (NYSE:GS)

Strong enough to give back TARP funds, Has Warren Buffett available to infuse capital.

Trades below book value, Forward P/E below 10

Disney (NYSE:DIS)

Iconic cast of characters, ability to appeal to multiple generations simultaneously

Forward P/E below 10, total debt below 1/2 year's revenue

Medtronic (NYSE:MDT)

FDA approval process adds time & cost to creating direct competition.

Forward P/E significantly below industry average and company 5-year average, total debt below 1/2 year's revenue

American Express (NYSE:AXP)

Global leader in business travel cards, Charge card (as opposed to credit card) focus helps limit fallout from overtapped consumers.

Forward P/E below 11, $21 billion in cash on hand.

Although these companies are likely to be affected by the U.S.'s recently declared year-old recession and the general tightening of consumer credit, their basic businesses are solid. Solid businesses, clean balance sheets, and cheap prices compared to intrinsic value mean these are the types of opportunities you should be taking advantage of right now -- while you still can.

This won't last forever
In ordinary times, companies this strong would not be available at such attractive prices. These deals are available only because the global financial meltdown has knocked out so very many of the institutional investors who would ordinarily bid these companies up much higher.

If you want to pay bargain-basement prices for some of the strongest businesses around, this is when you should pounce. It's not easy to buy when everyone is panicking, but it's precisely how generations of successful value investors have made their fortunes.

At Motley Fool Inside Value, we're taking advantage of the brief window we've been given -- and we're excited to buy companies like these at such reasonable prices. You can get a free, 30-day trial, with all of our recommendations but no obligation to subscribe, just by clicking here.

This article was originally published on Dec. 3, 2008. It has been updated.

At the time of publication, Fool contributor and Inside Value team member Chuck Saletta owned shares of American Express, as well as some stock in General Motors that he should have dumped years ago. Walt Disney and American Express are Motley Fool Inside Value selections. Walt Disney is a Motley Fool Stock Advisor pick. The Fool owns shares of American Express. You don't need to cross a moat to see the Fool's disclosure policy.