"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.
  • 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:


Price Change

Recent Price

2009 Earnings Estimates









Johnson & Johnson




NYSE Euronext




Otter Tail




Data from Motley Fool CAPS and Yahoo! Finance, as of May 28, 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.

It's baaaaack
I can't be the only one who's noticed that oil has nearly doubled since earlier this year. Oil is making a comeback, yet oil stocks such as those of ConocoPhillips haven't exactly been gushers. No, the correlation between black goo and share price obviously isn't perfect, but such high-level data points are interesting nonetheless. That sounds like opportunity if you ask me.

And as they have been for a while, our CAPS community is still pretty bullish on ConocoPhillips. As CAPS member donNico recently wrote:

[ConocoPhillips] will outperform the market simply based on the taiilwinds crude oil and natural gas will receive as a result of demand reemerging in the developed world as well as the continuous growing demand of the developing world. We nearly reached $160 per barrel of crude in August of 08; equally as crazy is current crude at $45. When the economy gets to its feet we will find oil at the $60 to $80 range. A doubling in crude price will have a similar impact on [ConocoPhillips] stock. On top of this, Obama's upcoming inflation will further dirve up oil prices. Oil and materials are a safe bet on many fronts right now.

On top of last year's commodity crash, two things have dragged this company down:

  • A massive goodwill impairment that makes its financials look like utter death.
  • Warren Buffett admitting he was wrong to buy shares last summer, and recently dumping millions of Berkshire Hathaway's (NYSE:BRK-A) (NYSE:BRK-B) Conoco shares.

Both, however, are either immaterial to Conoco's earnings power, or misunderstood by investors. Maybe a little of both.

The first -- the goodwill impairment -- can be sufficiently explained by a Reuters article earlier this year:

It is important to note that while the impairment tests are driven by accounting rules, they are not expected to change economic realities on the ground, as we anticipate development opportunities in ConocoPhillips's upstream portfolio will generally come "back in the money" in a rising commodity price environment.

These noncash charges don't resemble what most people would consider "losses."

Second, and perhaps more important, was Berkshire Hathaway's recent Conoco divestures, leading some to believe Buffett's throwing in the towel on the stock.

But what you have to consider here is that investors sell shares for many different reasons. In this case, Berkshire disclosed that it's selling Conoco stock in order to gain tax advantages -- not because it's giving up. Here's how Berkshire put it in a company statement earlier this month:

We sold 13.7 million shares of ConocoPhillips during the first quarter and additional shares were sold subsequent to the end of the quarter. Although we expect the market price of ConocoPhillips to increase over time to levels that exceed our original cost, we are likely to sell some additional shares prior to that time and generate additional capital losses that we can carry back to prior tax years when we generated net capital gains.

Add it all up, and you get a good company in a quickly rebounding industry, which is being held down by forces that may be misunderstood. That's a trifecta that rarely leads to disappointing results.

Your turn to chime in
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For related Foolishness:

Fool contributor Morgan Housel owns shares of Berkshire Hathaway. Berkshire Hathaway is a Motley Fool Inside Value pick. NYSE Euronext is a Motley Fool Rule Breakers recommendation. Johnson & Johnson is a Motley Fool Income Investor selection. Otter Tail is a Motley Fool Hidden Gems recommendation. The Fool owns shares of Berkshire Hathaway, and has a disclosure policy.