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With the markets selling off late last week and early this week due to the light Pomo schedule, the discounting of the end of QE2, and the debt ceiling fears coming to a head, value investors should be refreshing their watch lists and screening for issues that offer a substantial discount to intrinsic value while playing defense.

A low PE ratio is often not enough to go on in many cyclical industries such as the airline, auto, and technology industries. However, by purchasing shares in companies that are in unrelated industries at price to free cash flow multiples well below that of the overall market, investors can reduce much of the risk that comes from owning all of the bad investments, as well as all of the good companies that come with index fund investing.

The following 13 names are not recommendations, but do meet the criteria of being statistically inexpensive relative to free cash flows and other metrics. Some of these businesses may have longer term headwinds in the form of deteriorating business models, but over time owning baskets of the market's cheapest issues on a free cash flow and tangible book value basis makes for a value-added approach to investing in common stocks that should make up for a few losers.

By staying diversified, a quantitative approach allows value investors the opportunity to take profits while researching losing positions in greater detail and later deciding whether to add to the position or to cut losses. By cutting losses quickly and sitting out of a stock that loses 7% from your purchase price, many disasters can be avoided in the market.

With that said, other times a deep-value stock that drops simply becomes a better value. In view of this conundrum, investors should stay diversified. Technical analysis of the overall market is another key to investment success, as getting the direction of the market correct and adjusting exposure accordingly will maximize your returns.

Ingram Micro (NYSE:IM) was the victim of a large gap down in price recently, moving the name from $21 to $18.56 in a few sessions. The company is now trading for a 10% discount to tangible book value, 9.97X trailing earnings, and for just 8X forward earnings. Options investors may want to buy the December $15 calls for $4 as a way to lower their downside risks.

Potash (NYSE:POT) was reported to be the largest holding of Mohnish Pabrai. The stock looks undervalued considering it sells a finite resource of which it has a plentiful supply. The stock is trading for around 13X forward earnings and 22X trailing earnings, but I would imagine that shares will be trading on takeout value more than cash flows and earnings, as well as strong growth Q over Q and a market-leading position.

Freeport (NYSE:FCX) is cheap again after selling off some 20% from a recent interim high. The stock is cheap at 9X trailing earnings and 7.5X forward earnings; however, the shares are quite volatile and the business is highly leveraged to the price of copper. Until the end of QE, FCX may be a solid gainer, but longer term investors should be aware of copper prices and of the macro economic trends that drive movements in Dr. Copper's spot price.

Trading for just 6.8X earnings, VALE shares are starting to look too cheap to pass up. Like FCX, VALE is highly leveraged to the commodity boom, so investors should be careful in the name. However, given such a cheap price relative to operating cash flows and the potential weakness of the dollar longer term, VALE seems to be undervalued significantly at current prices.

Research in Motion (RIMM) has put the hurt on the bull camp in recent months, but that certainly does not mean the stock is expensive on a financial statement basis. RIMM is said to be a "broken company," but at 6.5X earnings, those fears are well priced into the stock already. RIMM is trading for just 5X cash flows from operating activities and 7X free cash flows. With EPS guidance of $7.50 this year, the stock could be a sleeper buy at current levels for patient longer term value investors. I'm short January 2012 puts on the name.

Microsoft (NASDAQ:MSFT) has sold off significantly since announcing its acquisition of Skype, and shares are now looking too cheap to ignore. I am scaling into the stock via selling the January 2012 $24 put options for $1.80 per contract. If the stock stays above $24, this investment will earn around 1% per month. MSFT is trading for 9.74X trailing earnings and for just 8.85X forward EPS estimates.

Another rough quarter for Hewlett Packard (NYSE:HPQ) is in the books, and the stock sold off some 7.5% in trading. The shares are that much cheaper, in my opinion, and I added to a small call spread position and bought a tiny position in the stock with a short June at the money call sold against the stock. Many times, I view a sharp selloff in a stock trading for seven times earnings as a gift, so long as you didn't have too much invested in the name before the selloff began (don't overconcentrate your holdings), and provided the fundamentals of the business and long term cash flow stream of the company have not been impaired.

Like Phil Davis of Philsstockworld.com, I like Cisco (NASDAQ:CSCO) after the recent selloff. Selling a January 2012 $17.50 call option and buying a small position in the stock seems like a good, low-risk way to enter the name and leaves for plenty of upside should the company win back the sentiment of the Wall Street media and trading community.

Google (NASDAQ:GOOG) is looking like a decent value relative to the company's longer term growth rate after the recent selloff, but investors are worried about Q over Q growth slowing and the company's competitive position in search, etc. I like the stock at current prices and think that shares make a lot of sense relative to many more popular cloud computing names. Investors may want to consider selling the June $530 put options for $12.65 per contract. forward PE is 13.4X.

Apple (NASDAQ:AAPL) is now a value stock at 16X earnings and 11.7X forward estimates, given the company's stellar track record of growth. Investors should be cognizant of the risks, but the recent rebalancing of the QQQ has likely hurt the stock price in the shorter term, while the longer term growth story may still be intact.

B Square (NASDAQ:BSQR) is a stock I wrote about as a short candidate (once in a while I get one right) a couple of months ago, but today at a PE under 8X and with solid growth, I think BSQR is a buy. The company has a strong position in the Apps market and recently made the Magic Formula Screen.

Sandisk (NASDAQ:SNDK) is another Magic Formula Screen member trading at cheap multiples on free cash flows. The stock has been under pressure recently and is trading for a PE under 7X. Investors seem to think the end is near for the company, but management has proven to be innovative in the past.

EBIX has sold off rather badly in the past three months, while the company is still exhibiting very strong year over year growth. Quarterly net income grew at a 20% or so clip between the first quarter of 2010 and the first quarter of 2011, yet the stock is trading for a PE of around 12.67X trailing earnings. Analysts have the forward PE ratio pegged at 11.96X. In other words, the stock looks like a buy, given strong historical growth rates and a solid free cash flow yield of 7.5%. I am in a starter position in the stock, have some short puts here, and have sold the January 2012 $20 call options against my stock position for $2.80 per share.

While the overall market appears to be overvalued and stretched, a selloff will likely hit all stocks at once as we have seen correlations move towards 1 during market panics. With the debt ceiling debate, the end of QE2, and turmoil economically in Europe, investors need to play defense when no Pomo is in the market and should try to manage risk effectively. By using selloffs to screen for good stock values, investors can lower their risk and substantially increase long term returns.

Source: 13 Dirt Cheap Stocks to Research and Buy on Dips

Additional disclosure: I may buy names on this list in the next few days