3 Stocks That Just Make Sense

"I like to go for cinches. I like to shoot fish in a barrel. But I like to do it after the water has run out."
-- Warren Buffett

History seems to show that good investing doesn't necessarily mean picking out complex situations and basing your investment thesis on Nobel-level math. In fact, as the recent financial crisis has shown us, too much complexity can often end in calamity.

In an effort to track down companies that may fall into that "fish in a barrel" category, I've turned to The Motley Fool's CAPS community. Using CAPS' stock screener, I looked for companies that have a price-to-earnings ratio below 15, a long-term debt-to-equity ratio below 50%, a return on equity above 10%, and a high rating from the CAPS community.

Source: CAPS.

These are just three of the results that the CAPS screener spit out, but you can run the same screen yourself to see the rest of the companies that made the cut. While the three companies above aren't meant to be formal recommendations, they are a good starting for further research. And on that note, let's take a closer look at them.

General Dynamics
When it seems like the U.S. government is the only entity you can count on to be spending in this economy, it's good to have Uncle Sam making up nearly 70% of your sales.

While General Dynamics' Gulfstream segment -- which sells jets to individuals, businesses, and governments -- has slid due to the economic slowdown, steady defense spending has kept the company from taking a bigger hit. Sure, it could be argued that the government is trying to tighten some screws on its budget, but the constant advancement in combat technology and America's focus on a strong military seem to position companies like General Dynamics well.

With competitors like Northrop Grumman (NYSE:NOC) and Boeing (NYSE:BA) breathing down its neck, it's essential that General Dynamics stays on top of its game. But with a return on equity of more than 20% and a trailing P/E of under 11, investors should see healthy returns from the company's stock.

WellPoint
Whether we're talking about UnitedHealth (NYSE:UNH), Aetna (NYSE:AET), or WellPoint, health insurers are sitting on pins and needles awaiting the outcome of the government's health-care reform plans.

This is for good reason. The bill that the House recently passed includes a government-run insurer, which would mean massive new competition for private companies. Of course, at this point in time, it looks like the "public option" faces an almost insurmountable battle in the Senate.

But perhaps the question shouldn't be whether a government-run insurer would be bad for the insurance companies, but whether WellPoint's stock has already adjusted for this possibility. Whether we're looking at price-to-earnings, price-to-book value, or price-to-free cash flow, WellPoint's valuation has fallen to levels last seen at the end of last year, when just about everything was down.

For a high-quality insurer like WellPoint, it may just be worth a gamble that reform won't be as bad for the company as investors seem to be expecting.

Sohu.com
Sohu.com seems to have something to offer most investors. For those looking for international exposure, the company is based in China. Growth-hungry investors no doubt like the way the company has nearly quintupled revenue since 2005. Value investors can appreciate the fact that the stock is trading at just over 13 times trailing earnings despite that blazing growth. And even skittish investors might brighten up at the company's nearly $600 million cash hoard and lack of debt.

On CAPS, more than 1,000 members have given Sohu's stock a thumbs-up, versus just 54 who think it will trail the rest of the market. Back in May, one of those bulls, bajaisaak, made it clear why Sohu should be a winner:

Simple demographics. China has over 1 Billion people yet a relatively low internet penetration. This is changing rapidly. [Sohu] is one of the most popular sights in the country, and its ownership of [Changyou.com] allows [Sohu] to profit from the massive trend of multi-player gaming in China. Both [Sohu] and [Changyou] are long-term winners.

Getting down to business
Now the CAPS community wants you. Do you think these stocks make sense? Or is the community off base? Head over to CAPS and join the 140,000-plus members already sharing their thoughts on thousands of stocks.

As Rich Greifner explains, even stocks that seem to make sense can be thrown off the rails by questionable management.