What to Buy When the Dust Settles

 |  Includes: AAPL, F, JPM, WMT
by: Dana Blankenhorn

There is a gigantic buying opportunity coming, the best one since early 2009.

You won't even have to worry about timing it. Sharp declines like the one we're presently going through take time to settle through the system. Snap-back rallies may take back only half the losses. There will be time.

So where should you put money to work once this decline ends? Where will the bargains be most obvious?

Wal-Mart (NYSE:WMT) is the most obvious choice. People will shop. Wal-Mart will sell to them. It's currently at a PE ratio of 11.8, which is a discount to the general market, and it could fall further from its present level, if trends hold. The attractiveness of the shares is indicated by just how little they have fallen – 4% – in the last week.

Ford (NYSE:F) is a screaming buy, or it will be in a real economy. At its recent price of a little over $11, it's down more than a third year-to-date, but there is little reason for it in the financials. It never was part of the bail-out, its leaders come from places like Boeing (NYSE:BA) and Toyota (NYSE:TM), and the current fleet continues to age. When the smoke clears its 40 mpg Ford Focus can pay for itself in fuel savings.

JP Morgan Chase (NYSE:JPM) is getting killed, and now trades at a PE of just over 8. Good. Let it get killed a little more. Yes, it has more of the ugly stuff – bad mortgages – than seems reasonable. But of all the big banks, it trades at the greatest discount. Remember, I'm not saying jump under a falling knife. I'm saying wait until the smoke clears and take a look at it. You may like what you see.

Apple Inc. (AAPL) has yet to go to the gallows, but if things keep going as they have the last few days it will. And after they execute it, you go in and get some, because they're executing. Its PE of 15 looks a little steep right now, but if it goes anywhere under that be ready to pounce. Remember that with its current cash horde its market cap of $360 billion values the operating company at barely $285 billion. Think that company is worth an operating PE of 10? I do.

Remember, when things hit rock bottom, you buy the highest quality earnings first. Just make certain things have hit rock bottom, which means waiting a few days after the drops stop. Then sell some mutual funds if you have to, but pick through the bargain bins and you're sure to come up a winner in time.

Disclosure: I am long F.

Additional disclosure: Hey I bought it at 4 early in 2009. Yeah I'm hanging on to it.