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Stock Strategist

Ugly Sell-Off Makes Attractive Bargains

Several stocks gain stars during market's retreat.

In light of today's market dip--in case you missed it, the Dow Industrials fell more than 300 points--and a myriad of uncertainties surrounding the current market environment, it's only natural that some would consider cutting their losses and taking their chips off the table. It can take nerves of steel to go bargain-hunting amid a homebuilding swoon, tightening credit markets, and soaring oil prices (to name a few), but we contend that times like these allow a disciplined investor to buck the "herding" trend and capitalize on the opportunities a market correction presents. All it takes is an unerring focus on company fundamentals, a willingness to turn a deaf ear to negative "noise," and a suitably long investment horizon.

It's no coincidence that those very qualities define our approach to valuing stocks. In our mind, the market's daily sentiment and gyrations have very little to do with a particular firm's worth. Our discounted cash-flow valuation method looks past market noise and focuses on the underlying fundamentals that determine a stock's fair value, which allows us to unearth many mispriced gems. Today's market retreat put several securities in our bargain bin, including industrial behemoth 3M.