Here's a little dose of straight talk after a truly terrible day for stocks.

You are likely thinking about putting money in cash equivalents. Not a bad idea, even at these levels. In fact, you should have done that already. If you did, then you have some cash on hand and you can consider doing some bargain hunting. Where should you look?

Well, one reasonable place to look seems to be oil and gas exploration companies. I have been urging you to consider these companies since last May. Let me restate the reasons.

One, these companies are still cheap by historical yardsticks. Many trade below five times cash flow. At their peaks, they have traded as high as 10-12 times earnings before interest, depreciation and amortization ( EBITDA). Don't expect them to trade at 12 times EBITDA anytime soon, but a move to 8 times certainly is a possibility.

Two, the secular growth story remains intact. Oil and natural gas prices remain higher than even Wall Street's sell-side analysts projected just six months ago. The companies are earning good money and are forecasting continued earnings growth. With oil prices near $28 a barrel and natural gas prices about $5 per million British thermal units, these companies are in the sweet spot. I think they will remain in that spot for a good while longer. Little new capital has flowed into the sector in the past five years, which suggests there will be substantial supply constraints for some years to come.

Three, institutional and retail investors are underweight oil and gas stocks. Energy stocks, which include more than just exploration and production companies, comprise a mere 7% of the S&P 500. Back in the early 1970s, energy's weighting in the S&P was around 30%! Today's low energy weighting suggests the chance of a tide of money coming into the sector if investors ever decide to seek companies with decent earnings visibility and reasonable valuations.

How then to play oil and gas? There are many ways, and you could make money using different approaches.

You could certainly buy the large independents like USX-Marathon (MRO:NYSE - news - boards). That might be the best way to play the money flows if mutual funds ever have to sell tech to meet redemptions. Marathon is the kind of name likely to get attention now that Royal Dutch Petroleum (RD:NYSE ADR - news - boards) has launched a hostile takeover of Barrett Resources (BRR:NYSE - news - boards).

There is another way to go that appeals a bit more to me -- buy the smaller and cheaper E&P companies stocks. That way if the oil and gas plays work the way I think they will, you will get that much more of a pop.

Here are two E&P names for your consideration. They are little known, which gives you an edge.

Prize Energy This gift of a stock's earnings has risen almost 200% in the past year

Source: BigCharts.com

The first is Prize Energy (PRZ:Amex - news - boards), a midsized oil and gas exploration company based in Grapevine, Texas. Prize was spun off from another E&P company I have recommended in the past, Pioneer Natural Resources (PXD:NYSE - news - boards). (Pioneer owns 20% of Prize.) In the past 12 months, Prize Energy's earnings are up 196%. It's cheap at 3-4 times 2001 EBITDA. The stock was off a mere 14 cents today.

Energy Partners This stock looks very cheap with earnings only three times EBITDA

Source: BigCharts.com

My second name is even more obscure -- Energy Partners (EPL:NYSE - news - boards). It's a New Orleans-based driller with proven oil and gas reserves in the Gulf of Mexico. It trades around 3 times EBITDA. That is cheap. It has a short history, which is one reason you may not have heard about it.

The company came public last November at $15. The Merrill Lynch deal allowed the controlling shareholder, Evercore Capital Partners, to take some money off the table. (Evercore still owns 35% of the company.) After the IPO, the stock fell to a low of $10 a share before rebounding a bit. It closed today at $11.55, up 20 cents a chare. That is a good sign.