First, look at the records of the companies. Have they been profitable up until the last quarter or last few quarters? If they've never shown a profit, most likely this isn't the environment that will produce them. Forget those bargains. They're full of hope and promise, not profits. Don't go near those stocks. The ones you want are the industry leaders that have kept growing, revenues and profits. Then you want to look at how they stand up relative to their competition and relative to their historical valuations.

The first is relatively easy to do. Go to a screening program that lets you screen by revenue growth and earnings growth. You can find one on MSN.com (http://moneycentral.msn.com/investor/finder/customstocksdl.asp) Choose an industry you want to analyze, then choose the variables Revenue Growth Year vs Year (as high as possible)....Market Cap (Large Cap) and then run the screen. Do the same screen but change one variable. Choose Net Proft Margin (as high as possible). Compare the two lists. When the same name comes up, that will be one you want to scrutinize even further.

The second relative valuation is found in Value Line where you can see a stock's absolute and relative P/E ratios. The first is given on an annual basis. Every year it shows a stock's average annual P/E ratio. If a stock has had a range of 15 to 25 in its P/E ratio and now is trading at 10 times earnings, this is one worth more time on due diligence.

The other relative value is the relative P/E ratio. This tells how the stock's P/E ratio has compared with the general market's P/E ratio. If a stock has an annual relative P/E ratio of 1, that means it has had a P/E ratio that has been in line with the P/E ratio of the general market. If it's below 1, then it's P/E has traditionally been below. Above 1, above the market. What you're looking for is the stock that has traditionally traded with a P/E above the market average that is now trading below. When you find that, spend more time with the stock. Value Line is available in all libraries for free. Online, it's available for a fee (www.valueline.com). It also comes in hard copy weekly for a subscription fee.

This takes some work but you can really find great bargains, not just in terms of absolute numbers but in terms of relative valuations over the years. I'd start my bargain hunting in the bank sector.