"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 is in the market these days. It's a real gut check, but that fear is creating 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.
  • Estimates of profitability in 2009.
  • Dreadful performance over the past 52 weeks. Yes, almost every stock meets this condition, but I'm looking for the biggest of the big. The mothers and fathers of all bargains.

Have a look:


Price Change

Recent Price

2009 Earnings per Share Estimates

Berkshire Hathaway (NYSE:BRK-A)




Chipotle Mexican Grill (NYSE:CMG)




Ingersoll-Rand (NYSE:IR)




Teck Cominco (NYSE:TCK)




Valero Energy (NYSE:VLO)




As of April 12, 2009.

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

Don't give up on Buffett just yet
Irony is the fact that the man who taught us how to capitalize off of others' fear is the target of all-out panic himself. At one point last year, credit default swaps (CDSes) were priced as if Warren Buffett's Berkshire Hathaway weren't just in the midst of a poor year, but potentially on the road to bankruptcy.

And while many of Berkshire's core holdings have been slaughtered with the rest of the economy, the doomsday scenarios haunting this stock, such as panic over long-term put options, are simply unfounded.

Accordingly, some investors see now as a once-in-a-lifetime opportunity to purchase shares of one of the most well-run companies in the world at a steep discount to intrinsic value.

CAPS All-Star jstegma is one of them, recently writing:

Warren Buffett has a long track record through many different economic twists and turns. People seem ready to write him off as a has-been, but I think in times like these his experience is worth a premium. The highfliers tend to crash when the trends change but Berkshire remains steady.

Another thing to consider is the effect major inflation would have on those infamous index puts he sold. If it takes $100 to buy a cup of coffee, do you think you'll be able to get a share of [Starbucks (NASDAQ:SBUX)] for $15? Those puts have plenty of time to turn around, and with the way the government is printing money right now, I suspect they probably will.

Don't cry for Berkshire Hathaway
Now, it has never paid to bet against Buffett, but what happens when there's no more Buffett to bet against? Despite his claim that he intends to challenge Methuselah's record, the man is getting old. No one's hoping for it, but a Buffett-less Berkshire is guaranteed sooner or later.

So how much should investors fear Buffett's mortality? Probably not as much as you'd think.

Berkshire without Buffett would still be filled with top-quality companies that will gush profits long after he's gone. Car drivers won't flee GEICO. People won't stop drinking Coca-Cola (NYSE:KO). Men won't quit using Gillette razors. Berkshire's value is a product of what Buffett's already created, not just what he's capable of acquiring in the future.

The counterargument here is that there's a "Buffett premium" on Berkshire stock that will vanish upon his death. While the stock typically trades at a loftier valuation, the plunge over the past year has erased most of what anyone could consider a "premium" on this stock.

In more normal years, Berkshire was able to pull down between $8 billion and $13 billion in net income annually. Rounding to somewhere in the middle -- say, $11 billion a year – would price shares at all of 13 times normal earnings. 2009 earnings estimates price shares at roughly 15.6 times earnings. These are hardly measures of premium valuation, particularly for a company that owns dozens of the world's highest-quality businesses.

Your turn to chime in
What do you think about Berkshire Hathaway? More than 130,000 investors use CAPS to share ideas and swap opinions. Click here to check it out and speak your mind. It's 100% free to participate.

Further Foolishness:

Fool contributor Morgan Housel owns shares of Berkshire Hathaway. Coca-Cola is a Motley Fool Income Investor selection. Berkshire Hathaway, Coca-Cola, and Starbucks are Inside Value picks. Chipotle Mexican Grill is a Rule Breakers pick, while its Class B stock was recommended by Motley Fool Hidden Gems. Berkshire Hathaway and Starbucks are Stock Advisor recommendations. The Fool owns shares of Starbucks, Chipotle, and Berkshire Hathaway. The Motley Fool has a disclosure policy.