Last year's market crash knocked the stuffing out of many stocks. Many of the beatings were well-deserved. Money-losing car companies such as General Motors, and overleveraged investment banks such as Lehman Brothers, had serious debt problems that meant their demises were likely only a matter of time.

But many companies were knocked down for reasons other than the collapse of their financial house of cards. Some fell because the overall economy slipped into recession, taking their businesses along with it. Some dropped simply because the overall market was tanking, and as people pulled money out of mutual funds, those funds needed to sell anything that had liquidity in order to raise cash.

In other words, while some "cheap" stocks deserved their haircuts, others are now serious bargains.

It's time to imitate Benjamin Graham
It's no coincidence that value investing -- the strategy that made Warren Buffett rich and famous -- was perfected on the heels of the Great Depression. With stocks trading as if financial Armageddon were just around the corner, it took a special kind of courage to buy during that meltdown.

Yet that's exactly what value investing pioneer Benjamin Graham was busy doing -- fine-tuning the concept of value investing and making his own fortune along the way.

These days, though the economy isn't quite as bad as it was during the worst of the Depression, the parallels are certainly strong enough for you to stand up and take notice. Unemployment is in the double digits in much of the country. This current recession has lasted longer than any since the Great Depression itself. And of course, the stock market's 2008 plunge invites way too many comparisons to the aftermath of the 1929 crash for comfort.

Whether or not we're really in the middle of the second Great Depression, it makes sense to study investors like Graham who were successful then. If history is repeating itself, his strategies provide a tremendous road map on how to invest successfully amid an otherwise nightmarish economy.

And if this isn't Great Depression: Part Two, well, disciples of Graham -- such as Buffett -- have certainly been successful enough investors to suggest that value investing works outside of depressions as well.

The cheaper, the better
Perhaps the best part of the value investing strategy is that it's so very straightforward. In essence, value investors look to buy stocks for less than they're objectively worth, and then simply hold on to their investment until the market realizes that fact.

There's no rocket science involved, but you do need to be willing to buy what the rest of the market is busy selling as garbage -- provided there's really treasure buried there.

One way to tell whether the market has mispriced a company, thus creating a value opportunity, is to look for companies selling for less than their tangible book values. Take a look, for instance, at these:


Price-to-Tangible Book Value Ratio

Price-to-Normalized Earnings Ratio

Nippon Telegraph and Telephone (NYSE:NTT)



Valero Energy (NYSE:VLO)



Ameren (NYSE:AEE)



Royal Caribbean (NYSE:RCL)



Sunoco (NYSE:SUN)



Terex (NYSE:TEX)



Armstrong World Industries (NYSE:AWI)



Data from CapitalIQ, a division of Standard and Poor's, as of July 7, 2009.

They're all trading below what they might fetch in a liquidation sale. Yet they've all posted positive normalized earnings over the past 12 months, which indicates that they may not be quite as dead as the market thinks they are.

While these aren't official buy recommendations, they -- and stocks like them -- are good places to start looking for opportunities to begin building your own value-focused portfolio.

Are you ready to buy?
At Motley Fool Inside Value, we're salivating over the tremendous bargains now available in the market. As disciples of Graham and Buffett, we know that buying the survivors during a panic sale is a great way to make money as investors. If you'd like to follow along with us in the footsteps of those amazingly successful investors, then join us today for your 30-day free trial. Simply click here to get started.

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At the time of publication, Fool contributor and Inside Value team member Chuck Saletta did not directly own shares of any company mentioned in this article, but his wife owned shares of Valero Energy. The Fool owns shares of Terex and has a disclosure policy.