Of all the insight I've heard over these few crazy months, the most telling came from an investor who appeared on CNBC last fall and, being entirely serious, advised, "There're only two positions to be in right now: cash, and fetal."

I get it. Even with the recent rally, it's ugly out there. Many companies that overleveraged their balance sheets are permanently impaired and will likely never fully rebound. Exploding financials like Citigroup (NYSE:C) come to mind. We had an unprecedented boom; now we're in the middle of an unprecedented bust. That's how markets work.

Even so, history tells us time and time again that market panics and forced sell-offs indiscriminately throw the good out with the bad. Amid the frenzy over financial markets and the "sell-now-ask-questions-later" mood of global investors, opportunities are being created for bargain-hunting investors like we haven't seen in decades.

Using the wisdom of our 135,000-member-strong CAPS community, I've hunted down a few dirt cheap, high-quality companies. Have a look:


Recent Share Price

Forward P/E Ratio

5-Year Expected Growth Rate

TTM Return on Equity

Dividend Yield

CAPS Rating  
(out of 5)








Wal-Mart Stores














Data from Yahoo! Finance and Motley Fool CAPS, as of June 4.

All three are well-established, large-cap stocks. Let's break down the bullish argument for each one.

Golden arches, golden returns
Frugality. Necessity. Convenience. These are words that will underline the restructuring of our economy. Moving from an "I deserve it!" mentality to a "can I cut this out of my budget?" culture is written in stone, as shell-shocked consumers adjust to the demise of easy credit.

Some companies, however, can thrive off this shift. McDonald's is one of them. It holds a lucrative combination of both brand-name appeal and bargain-priced necessities that is extremely rare. As consumers scale down and cut back, cheap food from a name they know becomes a magnet.

While the rest of the market crumbled, McDonald's shares are actually up over the past year. So why are we even considering them a bargain? Here's what CAPS All-Star wiz11 has to say:

McD's has a solid model, well thought out and is obviously time proven. Name brand recognition and innovative ideas are helping bolster the companies performance as people try to tighten their belts (pun intended). They are gaining market share as their target market expands due to spending habits being reined in (people don't go out to eat at a fancy restaurant, they take the kids to McD's for a fast, cheap meal). Meanwhile, the company is taking advantage of [Starbucks Nasdaq: SBUX)] (and others) weaknesses and has been experimenting with Tea and Coffee products-preliminary results are that these ideas are taking off.

Valuation wise, shares trade at less than 15 times forward earnings. The cheapest stock in the market? Not by a long shot. But keep perspective in mind here: This is a growing company with an exceptional niche heading into an economy practically built for its business model. That ain't bad.

And another ...
Wal-Mart is an equally impressive "scale-down" story as consumers hunt for bargains on everyday goods. Less industrial than Costco (NYSE:COST) and not as high-end as Target (NYSE:TGT), Wal-Mart has a near-stranglehold on the "I'm looking for cheap food, toothpaste, and maybe some new socks" crowd. Here's what CAPS member TexasPineapple had to say:

Bargain shopping is here to stay. [Wal-Mart] is just looking for the next product, market segment or service to achieve dominance. Ready cash needs to be deployed and their record is pretty good in being ahead of the curve in average to good market environments which seems the most likely scenario given the two steps forward, 1.5 steps back patterns.

Food for thought
While we're on the subject of cheap necessities, check out food giant SYSCO. I don't necessarily like the high reliance on restaurants -- most of which may struggle -- but the efficiency, profitability, and dominance of this company is quite compelling. As CAPS member StockTradingFool writes:

What's there NOT to like about SYSCO? It's the top dog in a growing market, it's got a great balance sheet, it's been consistently increasing its dividend (which is currently yielding in excess of 4%), it's dividend payout ratio is less than 50% (meaning that it should be able to sustain the current dividend), and it's PEG ratio is right around 1.0 (meaning it's considered to be fairly priced).

Your turn to chime in
Have your own take on any of these companies? More than 135,000 investors use CAPS to share ideas and swap opinions. Check it out and speak your mind. It's 100% free to participate.

For related Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. Costco and Starbucks are Motley Fool Stock Advisor selections. Costco, Starbucks, and Wal-Mart are Inside Value picks. SYSCO is an Income Investor selection. The Fool owns shares of Costco and Starbucks, and has a disclosure policy.