Fortune favors the daring!
Who would dare buy in this crazy market? Warren Buffett, that's who!

by Brian Hicks

I don’t hide my loathing of Best Buy (BBY:NYSE), the number-one retailer in the U.S. of electronics and worthless Performance Service Plans (PSPs).

In fact, a few months ago I told you that if Best Buy were a country, I would drop a daisy-cutter bomb on it.

On August 8, the bomb dropped.

The company announced a molasses-like slowdown in the sale of computers, high definition TVs and DVD players.

The result was a complete trouncing of its stock: Best Buy lost more than US$3 billion in market capitalization within 6-1/2 hours.

But while Best Buy bulls were running for the hills that day, investors were putting money into other areas of the broader market.

On a day that saw Best Buy down more than 36%, the Dow rallied 220 points.

What gives? A bottom?

I’m not sure. But Warren Buffett’s latest actions may offer a hint of what’s to come.

Never pay a man a penny more than he’s worth

That’s a good rule of thumb for employers. And it’s the same for stocks.

Buffett, known to haggle down the price of a hot dog at the ballpark, has recently invested over US$1 billion in two beaten-down stocks—Level 3 (LVLT:NASDAQ) and The Williams Companies (WMB:NYSE).

His intention is clear: pick over the carcasses of cash-strapped companies. Buy quality assets for pennies on the dollar. Then sit on a potential cash horde 5 to 10 years from now.

And why not?

While investors flee for the exits in fear, savvy investors are beginning to buy the market at reasonable valuations.

That’s right. The market is actually reasonably priced. Maybe even cheap.

You can certainly make a case that Level 3 and Williams are cheap.

And others make a case that Level 3 and Williams are too risky, despite Buffett’s investment.

But I’m sticking with Buffett.

Even though I’m currently trading both stocks in my trading service, I also believe these are two very good long-term investments.

Level 3 currently trades for about US$5.75 a share. But I’m looking for the stock to move up towards its 52-week high of US$7.82. Not a huge move in dollars and cents, but a rally of 36% nonetheless.

Same with Williams. It currently trades for about US$2.75 a share. I’m looking for a move to the US$4 to US$5 range.

Both stocks are buys at current levels.

Contact: LVLT, 1025 Eldorado Boulevard, Broomfield, CO 80021, tel. 720-888-1000, fax 303-926-3477; WMB, One Williams Center, Tulsa, OK 74172, tel. 918-573-2000, fax 918-588-2296.