"I will tell you how to become rich.
Close the doors.
Be fearful when others are greedy.
Be greedy when others are fearful."
-- Warren Buffett

Can't argue with that, can you? I don't need to remind you of how much fear fills the market these days. It's a real gut check, but that fear is creating incredible opportunities for investors patient and diligent enough to search for the babies thrown out with the bathwater.

Using our Motley Fool CAPS ranking system's screening tool, I scanned for bargain companies with the following characteristics:

  • Five-star ratings -- the highest our CAPS community offers.
  • Trailing dividend yields of at least 3%.
  • Price-to-book ratios no greater than 1.
  • Dreadful performance over the past 26 weeks. Yes, most stocks meet this condition, but I'm looking for the big crashers. The complete capitulators. The mothers and fathers of all bargains.

Among others, I dug up these five, which have been shredded to such paltry levels that it's hard to keep ignoring 'em:


Price Change


Price/Book Ratio

2009 earnings estimates

ArcelorMittal (NYSE:MT)





ConocoPhillips (NYSE:COP)





Duke Energy (NYSE:DUK)





Euroseas Limited (NASDAQ:ESEA)





Trinity Industries (NYSE:TRN)





Data from Motley Fool CAPS, Yahoo! Finance; screen run Feb. 18, 2009. Price change from Aug. 22, 2008 through Feb. 17, 2009.

None of these are necessarily recommendations -- just good starting points for you to dig a little deeper. You can run an update of this screen yourself, if you like.

What goes up ...
Things were looking unstoppable for ArcelorMittal until early last summer. China was exploding. India was growing by leaps and bounds. Global economies were on a building boom of unprecedented proportions, and this steel giant was lovin' every second of it.

Fast-forward a handful of months, and things couldn't be more different. CAPS member stockpickeraz laid out a powerful bearish pitch late last month:

Worldwide economy is still in a nose dive. We have yet to still the bottom in commodities. Recession will last longer than most people think. Unemployment rate will continue to rise. I'm going to play it smart and stay out of this market for some time. I will not be fooled into this market because of one UP day of trading. They know nothing. Don't listen to Cramer and the others out there. He said that the bottom of the crises was last year.

Fair enough. I won't argue. No one knows when the recession will end. No one knows exactly where the bottom is. All we do know is that it's bad right now, and it'll be painful for some time to come.

Nonetheless, just because we don't know when the economy will bottom absolutely doesn't mean the economy won't bottom. The right time to buy notoriously cyclical stocks like ArcelorMittal is at the bottom of the cycle. Since no one knows exactly where or when that is, the next best thing is to buy well into an unequivocal, inarguable, and in-your-face downturn. Thankfully, that's where we are today.

Hence, I like the contrarianism of Itemirus, who wrote last month:

While this stock has been brutally bashed by the market in the past year, let's remember that this is the nr.1 steel company in the world and that it is trading below book value. Let's not forget that ... it pays a ... dividend. It will go through some turbulence in the next months, but eventually, when commodities prices go back up and the infrastructure global mega trend gains steam, the real value of the company will be relfected in price. ... I guess I did as Buffett says: buy a wonderful company at a fair price.

Spoken like a true value investor. Last summer, investors could line up in droves to tell you why this stock was a screaming bargain at $100 a share. Today, you have to search for the brave soul willing to stick his or her neck out to test the waters at $23 a share.

While the global economic scene has of course changed markedly since then, the long-term earnings power of ArcelorMittal -- along with competitors like Nucor (NYSE:NUE) and U.S. Steel (NYSE:X) -- is hardly permanently impaired. In fact, even the shell-shocked analysts who're pricing nothing but doom and gloom into ArcelorMittal's current share price have issued an average forecast for earnings greater than $6 a share in 2011, and more than $9 a share in 2012 -- consistent with a reversion to the earnings and growth this stock enjoyed before financial markets pulled a rug out from global economies.

You take it from here 
Disagree? See it in another light? Just want to see what the rest of the pack is saying? More than 125,000 investors use CAPS to share ideas and swap opinions. Click here to check it out. It's 100% free to participate.

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Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Duke Energy is a Motley Fool Income Investor recommendation. The Motley Fool is investors writing for investors.