"Value stocks, also known as undervalued stocks, trade at a lower price than the company's reputation, earnings outlook, or financial situation would seem to merit."

--

TheStreet.com Glossary

(Related term:

Undervaluation

)

Sept. 14

,

Bank of America

(BAC) - Get Report

announced that it would acquire

Merrill Lynch

(MER)

. Bank of America Chairman and CEO Ken Lewis called the acquisition the "deal of a lifetime."

Sept. 24

, it was announced that Warren Buffett's

Berkshire Hathaway

(BRK.A) - Get Report

would invest up to $10 billion in

Goldman Sachs

(GS) - Get Report

. Buffett said Goldman "has an unrivaled global franchise, a proven and deep management team and the intellectual and financial capital to continue its track record of outperformance."

Oct. 1

, Buffett made news again when it was announced that Berkshire would buy $3 billion of

GE

(GE) - Get Report

preferred stock.

Oct. 3

,

Wells Fargo

(WFC) - Get Report

said it reached a definitive agreement to acquire

Wachovia

(WB) - Get Report

.

TheStreet.com's

Laurie Kulikowski wrote, "A combined Wells Fargo and Wachovia will have assets of $1.42 trillion, deposits of $787 billion, and assets under management, through mutual funds, of $258 billion. Together, the companies have more than 10,000 banks in 39 states and Washington, D.C., 12,000 ATMs and 280,000 employees... For Wells Fargo, the acquisition will give it a first-time banking presence in several states along the East Coast and in the South."

Then Oct. 16, in an op-ed for

The New York Times

, Buffett wrote that "fears regarding the long-term prosperity of the nation's many sound companies make no sense... most major companies will be setting new profit records 5, 10 and 20 years from now."

So as the

financial sector

continues to

scramble for survival

, can the above moves be seen as large-scale examples of value investing?

And as

bears continue to run the stock market

, is now the time to find a "deal of a lifetime" of your own?

The following are value-centric insights and advice from

TheStreet.com

.

From

Top 5 All-Around-Value Stocks for Nov. 11

Kroger

(KR) - Get Report

is one of the nation's largest grocery retailers. Our buy rating for Kroger has been in place since March 2006. Although the company has generally had poor debt management, we feel that the rating is justified due to strengths such as the company's earnings per share growth, revenue growth and increase in net income.

For the second quarter of fiscal 2008, the company reported revenue growth of 11.9% year over year. This growth appears to have trickled down to the company's bottom line, helping to boost EPS by 10.5%. EPS rose from 38 cents in the second quarter of fiscal 2007 to 42 cents in the most recent quarter. Net income also grew during the second quarter, improving 3.5% from $2.76 billion to $2.77 billion.

Management credited its Customer 1st strategy as the basis for its ability to create value for its shareholders. Because of its year-to-date results and management's outlook for the remainder of the fiscal year, Kroger raised its identical sales guidance for fiscal 2008 to a range of 4.5% to 5.5%, excluding fuel. The company confirmed its earnings guidance of $1.85 to $1.90 per diluted share. The company had previously released earnings guidance of $1.83 to $1.90 per diluted share. While Kroger's share price has dropped recently, we do not see any strong reason stemming from the company's fundamentals that would cause a continuation of the past year's decline.

Read the full version of

Top 5 All-Around-Value Stocks for Nov. 11

.

Cramer: Cheap Stocks Aren't (Video, Nov. 10)

Jim Cramer tells investors that bonds will determine whether a so-called cheap stock is a buy.

To watch the video, click the player below:

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Plus, don't miss these value-focused videos on

TheStreet.com TV

:

Cramer: The Worthiest Stocks Out There

(Nov. 7: Don't just buy because prices are cheap, says Jim Cramer.) and

Stryker Not Worth Chasing

(Nov. 6: David Peltier, portfolio manager for

TheStreet.com Value Investor

newsletter, advises against buying shares of medical device maker

Stryker

(SYK) - Get Report

at these levels, despite the firm's top-line growth and the overall aging of America.).

From

STOCK PICKS: Top 5 All-Around for Oct. 28

:

Hewlett-Packard

(HPQ) - Get Report

provides products, technologies, solutions and services to individual consumers and businesses worldwide. Our buy rating for Hewlett-Packard has not changed since November 2004, based on the company's impressive record of earnings per share growth, increases in net income and revenue, attractive valuation levels, and good cash flow from operations.

Hewlett-Packard's total revenue for the third quarter of fiscal 2008 grew 10.5% year over year, which allowed EPS to improve by 21.2% compared with a year ago. The company has, in fact, demonstrated a pattern of positive EPS growth over the past two years, and we feel that this trend should continue. Net income increased by 14%, rising from $1.8 billion in the third quarter of fiscal 2007 to $2.03 billion in the most recent quarter.

Read the full version of

STOCK PICKS: Top 5 All-Around for Oct. 28

.

Pactiv's Not Attractive (Video, Oct. 23)

Value Investor portfolio manager David Peltier explains why packaging maker

Pactiv

(PTV)

isn't worth wrapping up and sticking in your portfolio despite lower materials costs.

To watch the video, click the player below:

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From

Three Good Companies for Next to Nothing

:

It's official: The general investing public truly hates the stock market. How else can you explain the absurdity surrounding some valuations today? And no, I

Sham Gad am not talking about low price-to-earnings or low price-to-book ratios, although they are fine metrics to lean on.

Instead, I am referring to businesses that have gone beyond low earnings valuations and have gotten to where they trade near net cash on the balance sheet. In other words, the market is giving you the businesses for next to nothing.

While I certainly believe that many businesses will be earning record profits four or five years from now, we need to consider the situation at hand. And the reality is that profits are likely to contract in the near term.

I'm always looking for a margin of safety, and in this environment I like to look at average profits and cash flows for the last four or five years to get a more accurate picture of the numbers for next year.

Worth a closer look is

KHD Humboldt Wedag

(KHD)

, an industrial engineering supply company. The company basically provides know-how in building and designing cement and coal and mineral plants all over the world. Today

Oct. 23 the stock trades at about $15, for a market cap of around $445 million. The company has a net cash position of $430 million, or about $14 a share.

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Business still seems to be OK. The company earned 89 cents a share in the second quarter, but you should understand that it prospers from the growth in global infrastructure, which is likely going to slow down further. Nonetheless, the company continues to grow backlog, which stood around $1 billion at the end of June 2008. I don't depend on backlog in an environment where credit is all but gone to everyone except those who don't need it. Still, the company does business all over the world, and regions such as the Middle East have not been as severely hit.

Read the full version of

Three Good Companies for Next to Nothing

.

From

STOCK PICKS: Top 5 All-Around for Oct. 21

:

These are stocks of companies that meet a number of criteria, including annual revenue of more than $500 million, lower-than-average valuations such as a price-to-sales ratio of less than 2, and leverage that is less than 49% of total capital. In addition, they must rank near the top of all stocks rated by our

TheStreet.com Ratings proprietary quantitative model, which looks at more than 60 factors. The stocks must also be followed by at least one financial analyst who posts estimates on the Institutional Brokers' Estimate System. They are ordered by their potential to appreciate.

Lockheed Martin

(LMT) - Get Report

is a global security company headquartered in Bethesda, Md. We have rated Lockheed Martin a buy since May 2004. This rating is based on various strengths...

For the second quarter of fiscal 2008, the company reported slight revenue growth of 3.6% year over year. The second quarter also brought

EPS

improvement of 18.1% when compared with the same quarter a year ago.

Net income

increased by 13.4% in the second quarter, rising from $778 million in the second quarter of fiscal 2007 to $882 million. In addition, net operating

cash flow

increased slightly by 6.19%.

Management reported that Lockheed Martin's second-quarter results were in line with its expectations for the quarter. We feel that the company's strengths outweigh the fact that it shows low profit margins, and we believe that the stock should have good upside potential under most economic conditions.

Read the full version of

STOCK PICKS: Top 5 All-Around for Oct. 21

.

From

Kass: Stocks I'm Longing For

:

Here are some of my ideas as to where I

Doug Kass would begin to look for long investment positions amid the carnage we call the U.S. stock market.

I would stick with companies that are self-funding (have limited external financing requirements), diversified (not dependent on narrow end markets) and not U.S.-centric with a broader geographic focus (i.e., a beneficiary of export and emerging market growth). Within the context of a low interest rate environment, I would particularly emphasize high-yielding stocks.

Some examples might include

American Express

(AXP) - Get Report

,

General Electric

(GE) - Get Report

...

Read the full version of

Kass: Stocks I'm Longing For

.

Plus, don't miss

Kass: Buy It Like Buffett

.

From

Stock-Picking Lessons From a Pig Farmer

:

Mr. Womack

the pig farmer had been investing for 40 years and was consistently profitable. His secret was simple. He waited until he read in the news that the market was making new lows and all the experts were predicting the end of the world. He would select a package of stocks that had fallen below $10 a share in profitable companies that paid dividends.

When the market eventually recovered in a year or two and the news was full of ebullient predictions, he would drive back to town and sell them all. He thought of stocks like buying pigs. He bought them when they were cheap and sold them when they were expensive.

I

Tim Melvin sat down on Friday

Oct. 17 and did a search for stocks that Mr. Womack might have liked... Keep in mind that Mr. Womack held his stocks until the markets were roaring and everybody loved stocks again. That will probably take a few years, but you will collect handsome dividends while you are waiting.

The first company is one I liked at higher prices and like even more at these levels.

CBS

(CBS) - Get Report

stock has been pummeled in the last few weeks. The stock has fallen almost 50% in just the last month. Advertising revenue and margins are dropping for the broadcasting company in the weak economy.

Image placeholder title

CBS recently announced that third-quarter profits would be below analysts' expectations... However, the stock now trades at just 5 times earnings. The shares yield 12% at this level, and the dividend is not only safe, most expect the company will continue to raise it over the years.

Read the full version of

Stock-Picking Lessons From a Pig Farmer

.

From

Invest Like Graham With This Infrastructure Stock

:

Apparently,

Benjamin Graham

the "Dean of Wall Street" had a lot of time on his hands in retirement, as he had tested these methods over 20 years and found they doubled the market return.

The method was simple: He wanted an earnings yield twice that of the

AAA bond

but never more than 10 times earnings. As a financial test, the company should own twice what it owes. With AAA bond yields around 5.5%, this equates to a max

P/E ratio

of 9 times earnings. After adding the equity and debt constraints I found 205 stocks that fit the criteria.

I

Tim Melvin found some interesting stocks on the list that are worth the attention of long-term investors. I usually screen on asset-based criteria, so this was something of an eye-opener for me.

One name that I found particularly appealing was

LB Foster

(FSTR) - Get Report

.

Read the full version of

Invest Like Graham With This Infrastructure Stock

.

Plus, don't miss these value-focused videos on

TheStreet.com TV

:

Cramer: Buffett's Buying, But Should You? (Oct. 17: Jim Cramer ponders whether the average investor can be like Buffett.)

Cramer: How to Find Value Stocks Now (Oct. 16: Cramer offers a new strategy.)

Cramer: Why Kimberly-Clark Has Value (Oct. 16: Goldman Sachs' recent recommendation has merit, says Cramer.)

Warren Buffett's Investing Philosophy (Oct. 1: Alice Schroeder, author of the new Warren Buffett biography The Snowball, details the Oracle of Omaha's investing methods and explains why he recently invested in Goldman Sachs.)

From

Value Stocks on the Retail Rack

(Video, Oct. 9):

Research Manager David Peltier finds value opportunities in retail stocks. His take: Discount stores aren't always better. Instead, he suggests checking out

Dillard's

(DDS) - Get Report

.

Peltier: "The stock just moved under $10 a share, but when you look at their

balance sheet

, they a have a

book value

of over $30. And a lot of that is in real estate, so maybe it's not really $30, but even if it's closer to $29 or $25, I think that this is the kind of deep value discount stock that folks would be looking for in this environment... The company's finances are relatively strong and I think they can weather this downturn."

To watch the video, click the player below:

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From

Four Drilling Stocks for Value Investors

:

Across the board, both international and domestic oil companies are raising their oil-services budgets to meet expected worldwide demand growth. Budgets for exploration and development are expected to grow by 20% in 2008 and 10% in 2009, according to industry analysts. This bodes well for the companies in the oil service industries. The potential for increased drilling offshore in the U.S. could be an additional source of long-term growth of the industry as well.

Many of the stocks are cheap. I wrote about

Bronco Drilling

(BRNC)

last week. It remains one of my favorite stocks in the group. Shares of the land driller

Nabors Industries

(NBR) - Get Report

have fallen 50% from the highs and have a

P/E

of just 8.

Read the full version of

Four Drilling Stocks for Value Investors

.

From

STOCK PICKS: Top 5 All-Around for Oct. 7

:

Chevron

(CVX) - Get Report

is one of the world's largest integrated energy companies. The company is engaged in every aspect of the oil and natural gas industry, with major operations in many important gas and oil producing regions worldwide.

We have rated Chevron a buy since October 2003. This rating is based in part on the company's strong growth in revenue and earnings, as well as its attractive valuation levels. For the second quarter of fiscal 2008, the company reported revenue growth of 49.0% year over year. This appears to have helped boost earnings per share (EPS), which improved 15.1% over the same quarter a year ago, thus continuing a trend of positive EPS growth over the past two years. Net income increased 11.1%, rising from $5.4 billion to $6.0 billion.

Chevron's future performance depends largely on the movements of crude oil and natural gas prices. Any adverse changes in these prices could negatively impact revenue. Furthermore, lower sales volumes and margins on the sale of refined products could also negatively affect the company's bottom line. However, we currently feel that the company's strengths outweigh the fact that its shows low profit margins and give the stock good upside potential under most economic market conditions.

Read the full version of

STOCK PICKS: Top 5 All-Around for Oct. 7

.

From

This Nightmare Is a Stock-Picker's Dream

:

For long-oriented stock-pickers who find good companies at great prices, many market environments are hard to navigate.

But right now, you are looking at hundreds of well-run companies with strong brand franchises, stellar balance sheets, market-leading positions -- and really cheap stock prices.

When the world returns to normal, you won't be able to buy

Home Depot

(HD) - Get Report

for the equivalent of five times normalized earnings. (That is to say that Home Depot will eventually rebound to earn $5 a share in profits.)

I cite Home Depot because the company is profitable (even in a housing depression) and has loads of cash and no debt.

Read the full version of

This Nightmare Is a Stock-Picker's Dream

(

RealMoney

access required).

From

Free Cash Flow Rules: AmEx, Mohawk

:

Profits are great, but they don't count for much in the long-run if a company is not generating FCF

free cash flow. After all, FCF is the money left over after a business pays all its bills.

A few perfectly legitimate accounting adjustments can tweak earnings to management's delight, but at the end of the day, it's the cash that's left over that counts. Businesses that produce healthy amounts of free cash flow can be valued with a higher degree of certainty and margin of safety than simply going on profits.

With everyone sour on the market today, several wonderful businesses continue to pour out fantastic levels of free cash flow and are thus increasing intrinsic value while the equity price sits still. Sooner or later the stock price will catch up.

Value investors love to seek out bargains in distressed industries. One such opportunity exists with

Mohawk Industries

(MHK) - Get Report

.

Mohawk and Shaw Carpet, a unit of Berkshire Hathaway, have a duopoly over the carpet and flooring industry... Over the three years during 2005-2007, free cash flow was $314 million, $615 million, and $710 million, respectively. So far in 2008, free cash flow has been $215 million, but that was with a $200 million charge to working capital in the first quarter.

Image placeholder title

So what's this cash worth? Let's make some quick, yet conservative assumptions. Considering the phenomenal growth rate in free cash flow over the past three years, let's assume that 2008 free cash flow comes in at $500 million, $210 million less than 2007 (we'll assume a transition year).

Fixation on cash generation keeps your analysis focused on what counts.

Read the full version of

Free Cash Flow Rules: AmEx, Mohawk

.

From

Cramer: Where to Put Your Money Now

(Video, Sept. 29):

Jim Cramer gives a rundown of relatively safe positions.

Cramer: "I think that the real values that are going to be created for people who are wiling to hold something for 18 months, still aren't there... I think you have to wait. I mean they're

stock prices not so low that you can say, 'You know what, I don't care anymore. I'm willing to buy.' So why did we buy the

Freeport

-McMoran

(FCX) - Get Report

? ... That's an example of something I've found that I waited literally

until the stock moved 50% down..."

To watch the video, click the player below:

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Plus, don't miss this video on

TheStreet.com TV

:

Cramer: Cheering for Wells Fargo and Wachovia

(Oct. 3: This unassisted bid offers great synergies, says Cramer.)

From

STOCK PICKS: Top 5 All-Around Value Stocks for Sept. 16

:

Each business day, TheStreet.com Ratings compiles a list of the top five stocks in five categories -- fast-growth, all-around value, large-cap, mid-cap and small-cap.

This list is based on data from the close of the previous trading session. Today, all-around-value stocks are in the spotlight. These are stocks of companies that meet a number of criteria, including annual revenue of more than $500 million, lower-than-average valuations such as a price-to-sales ratio of less than 2, and leverage that is less than 49% of total capital.

Kroger

(KR) - Get Report

is one of the nation's largest grocery retailers. The company also manufactures and processes some of the foods that it sells in its supermarkets, as well as operates a variety of additional store formats that include convenience stores, multi-department stores, and mall jewelry stores.

Our buy rating for Kroger has been in place since March 2006. Although the company has generally had poor debt management, we feel that the rating is justified due to strengths such as the company's return on equity, attractive valuation levels, and growth in revenue, net income, and earnings per share. For the first quarter of fiscal 2008, Kroger reported a revenue increase of 11.5% year over year, while net income grew 14.5%. Earnings per share also improved, rising 23.4% from 47 cents in the first quarter of fiscal 2007 to 58 cents in the most-recent quarter. The company's total sales increased 11.5%, while identical supermarket sales increased 9.2% with fuel and 5.8% without fuel. Return on equity also improved slightly in the first quarter, rising to 24.73% from 21.79% in the prior-year quarter.

Read the full version of

STOCK PICKS: Top 5 All-Around Value Stocks for Sept. 16

.

From

Value Investing's Golden Rule: Whirlpool, GE

:

All of history's great money managers adhere to the formula introduced in part one of this column.

They may not articulate the rule the same way, but each understands and employs this formula:

Image placeholder title

Absent a material change to the business, as price declines, risk declines, and your anticipated rate of return increases.

Let's look at this all-important precept more closely.

Risk declines in concert with price.

Let's assume you own shares of

General Electric

(GE) - Get Report

in your IRA account. The stock has declined from $38 to $27 a share over the last few months. If GE's long-term business value has not been impaired, the price decline in GE stock coincides with a decline in your ownership risk.

The decrease in risk is seen in the increase in the spread between price and value. If GE's business is worth $40 a share (my calculation; the mechanics of how I arrived at this number are unimportant for the purpose of this column), the spread between price and value has widened from $2 a share (when it traded at $38) to $13 a share ($40 value minus $27 price quote).

Lower prices increase your anticipated rate of return.

In the face of falling stock prices, investors get stressed. There is a magic elixir that will eliminate the stress: Sell! Sell GE at $27 to eliminate your risk. Sell GE because the recent price decline might continue. Sell GE so you can invest in risk-free Treasury bills.

It might alleviate your stress, but selling GE at $27 is a dumb move. If GE is worth $40 a share, your ownership risk is low and your anticipated rate of return is 50%. If you sell GE after the price has dropped to $27 and invest in Treasury bills, you'll generate a 2% yield. If you hold GE and wait until you can get a price that approximates the $40 value, you'll generate a 50% return (not including GE's 4.6% dividend).

If you hold GE, how long will you have to wait for a $40 stock quote? The short answer: I don't know. The wait could be a couple of months or it could be a couple of years. Pessimism permeates the market, making it difficult to secure bids that approximate value. Even if you have to wait two years, though, you'll get some nice benefits. Not only will you collect $2.48 a share in dividends (assuming there is no change in the dividend payout), but your asset will likely be more valuable in a couple of years. It's reasonable to expect that GE's business value may reach $47 or $48 a share by 2010.

Note that your cost basis in GE stock is irrelevant in applying the rule above. Whether you paid $4 or $40 for your stock doesn't matter. In deciding whether to sell the GE stock in your IRA, the only numbers that matter are the current price and the current value.

Read the full version of

Value Investing's Golden Rule: Whirlpool, GE

.

From

Value Stock Investing: CarMax, Overstock.com

:

The value-centric investor "insures" against risk by buying shares at a discount -- by paying a price for stock that is materially lower than value. My risk is low if I buy shares of a company at 50 cents per dollar of value. My potential reward is a 100% gain.

How do you find stocks that are selling at 50 cents or even 33 cents per dollar of value? The answer is easy to state, but difficult to put into practice: You have to be able to see things that other investors do not see.

Image placeholder title

Do you think you've identified the next big winner? Then tell me something I don't know. Tell me what you see that others don't see. Identify a specific variable in the valuation equation that the crowd of investors has overlooked or misinterpreted.

Read the full version of

Value Stock Investing: CarMax, Overstock.com

.

For more on stock-picking, visit our Stock-Picking Training section.

This article was written by a staff member of TheStreet.com.