"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. However, 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.
  • Terrible performance over the past 52 weeks. Yes, almost every stock meets this condition, but I'm looking for the bargain opportunities -- solid companies with great outlooks that are being valued like total losers.

Have a look:



Recent Price

2009 Earnings Estimates

Berkshire Hathaway (NYSE:BRK-A)




Cemex (NYSE:CX)




Philip Morris International (NYSE:PM)




Schlumberger (NYSE:SLB)




Teck Resources (NYSE:TCK)




Data from Motley Fool CAPS and Yahoo! Finance. Return from May 23, 2008, to May 20, 2009.

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

Valuing Berkshire Hathaway
Most investors don't spend a tremendous amount of time on due diligence before investing in Berkshire Hathaway. They're particularly investing in Warren Buffett alone, without a detailed analysis of Berkshire's businesses. As CAPS member Grimsooth simplistically described Berkshire's strength: "As long as Warren is around..."

Of course, there's nothing wrong with this. If there's anyone who you'd be forgiven for blindly following, it's Buffett.

But how much is Berkshire really worth? That's a mighty difficult question, and one that you probably shouldn't try to tackle with infinite precision.

One back-of-the-envelope way to get a sense of Berkshire's value is looking at historic multiples to book value. This gives us a view of Berkshire's net assets per share, plus whatever premium the market deems appropriate to reflect the company's true intrinsic value.

And a premium to book value it does deserve. Buffett himself writes in Berkshire's owners' manual, "Our book value far understates Berkshire's intrinsic value, a point true because many of the businesses we control are worth much more than their carrying value."

With that in mind, take a look at this table:

Year ending Dec. 31

A-Share Price on That Date

Book Value Per A-Share

Price-to-Book Value





































Sources: Berkshire's annual letters, Yahoo! Finance, and author calculation.

Based on this metric -- however simplistic and imperfect it may be -- Berkshire is valued at its lowest level by far over the past eight years.

The questions then becomes whether the current state of the economy makes Berkshire worth considerably less than it has been in recent years.

Some would argue yes, pointing to Buffett's age, and the vulnerabilities of Berkshire's reinsurance operations. Others disagree, showing how investments in Goldman Sachs (NYSE:GS) and General Electric (NYSE:GE) are examples of companies just throwing gobs of money at Berkshire in a time of crisis.

I happily side with the latter. If you believe Berkshire's a dying relic, then sure, maybe it warrants these historically low valuations. But if you believe that the current valuation is simply a reminder of the kind of panic-induced and short-sighted fear that's made Buffett who he is, maybe you'll look at today's share price with a sense of opportunity.

Your turn to chime in
Have your own take on Berkshire? 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.

For related Foolishness:

Fool contributor Morgan Housel owns shares of Berkshire and Philip Morris International. Berkshire Hathaway is both an Inside Value and a Stock Advisor recommendation. Philip Morris and Cemex are Global Gains selections and Cemex is also a Stock Advisor choice. The Fool owns shares of Cemex and Berkshire Hathaway, and has a disclosure policy.