In his Validea newsletter and his just published book Guru Strategies, stock advisor John Reese assesses companies based on the investment strategies of "legendary investors" such as Ben Graham and Warren Buffett.

Recently, the advisor has highlighted two retailers that pass his guru screens: Gildan Activewear (NYSE: GIL) and Jos. A. Bank Clothiers (NASDAQ: JOSB). Here's his contrarian look at the two out-of-favor firms.

"You might never have heard Gildan Activewear, a Montreal-based clothing manufacturer, but you may well have worn its products. Gildan sells T-shirts, sport shirts and fleece to wholesale distributors as 'blanks' -- that is, without logos or decorating. Screen printers then decorate the items with various designs and logos.

In The Cabot Benjamin Graham Value Letter -- which assesses stocks based on Graham's value investing critera, editor J. Royden Ward takes a look at Wal-Mart Stores (NYSE: WMT).

"In this month's Classic Benjamin Graham Value Model, our calculation suggests that the Dow is overvalued at 12,370 and undervalued at 8,305; as such, today the market is extremely undervalued.

"This low-risk environment means it's probably a great time to add risk by dabbling in our recommended stocks such as Wal-Mart Stores.

"How cheap is it? The recent decline in WMT shares has created an outstanding buying opportunity for investors. WMT shares now sell at only 12.3 times forward EPS with a dividend yield of 2.0%.

In his Hidden Values Alert, value investor Charles Mizrahi discusses three rules for "thriving during a panic". This in-depth, common sense review is must reading for serious investors. (For 10 specific stock ideas that meet value investing criteria, see our other post on a Benjamin Graham-type portfolio.)

"Warren Buffett once said, 'You don't know who's swimming naked until the tide goes out.' In the past year the tide was rapidly going out, and it exposed a lot of naked swimmers.

"The impact of the credit crunch continued to find its way into other asset classes. Correlations that investors held dear, namely that price movements in one global market would behave differently than price movements in another global market, became unglued.

"The past year has seen global markets move in lockstep with each other, providing investors no safe haven.

"Investors couldn't even hang their hats on diversification among different sectors. It is during periods of panic that all markets and sectors correlate in the same direction...down. Investors both institutional and retail acted in a similar manner: they froze.

"They began to sell assets, many times without regard to the underlying value of the asset. In order to raise cash for redemptions, hedge funds sold what they could, not always what they wanted.

"When stock market participants focus on the short term, employ leverage and need to liquefy their holdings, the table is set for the value investor.

"Indeed, it is during times of panic that value investors plant the seeds of future market-beating returns. While most investors are caught like deer in headlights as great companies are offered at bargain prices, value investors act.

In his Half-Priced Stocks newsletter, value investor Nathan Slaughter recently assessed stocks based on the general investment philosophy of Benjamin Graham, the noted value investor under whom Warren Buffett studied.

One issue that stands out in his view is Cabela's (NYSE: CAB), one of the world's largest specialty retailers of hunting and fishing gear, camping equipment, and outdoor apparel.

"The cornerstone to Graham's success and his enduring legacy to value investors was his 'margin of safety' concept. Specifically, he would take a hard look at dividend yields, price-to-book ratios, and other key metrics.

"Cabela's originated as a direct marketer and once primarily sold its products via catalog, but has since augmented that distribution channel with e-commerce operations and a growing chain of nearly 30 stores spread throughout 19 states.

It must have been hard for cautious executives to sit back and watch during the buyout boom, but it's looking pretty smart now: With the credit markets dried up, heavily-leveraged firms are finding themselves in a precarious position. Private equity firms are struggling to close deals they agreed to, watching some fall through, and wondering how a lot of the other ones will pan out.

But CEOs of publicly-traded companies who didn't get into the easy money game -- avoided excessive buybacks and stupid acquisitions -- are in a great place now: They have plenty of cash to scoop up bargains, and don't have to compete with any army of private equity firms like they would have had to a few months ago.

As Benjamin Graham and later Warren Buffett have often said, being fearful when others are greedy and greedy when others are fearful is the key to success in business.

Now that the private equity firms are getting fearful, it might be time for more strategic buyers to get greedy.

A recent piece on MarketWatch outlines ways to differentiate a value stock from a value trap. First, some definitions: A value stock is a stock that is being undervalued by the market, due to some sort of inaccurate perception about the company or industry. Eventually, according to experts like Benjamin Graham, the share-price will move to reflect the value of the underlying business: "In the short-run the market is a voting machine. In the long run, it's a weighing machine."

Value traps look like value stocks, but they don't go up. Often this is because the fundamentals of the business decline along with the share-price: the shares get cheaper as the business declines in value. The article talks about ways to avoid these stocks, and how find real value stocks.

There's a different kind of value stock: Companies that are tightly held, have no volume, and have share prices that don't seem to budge. Generally these are companies that are so tightly-controlled that they are almost private companies. Oftentimes, they can be run for the benefit of management rather than the stockholders and, with such a huge portion of the stock held by insiders, there's little that any activist investor or hedge fund can do.

Those of us who look for really cheap stocks, like micro-cap net-nets, have to be especially careful of this. When looking at really cheap stocks, make sure that there are incentives and options in place for value to be unlocked. If there aren't, keep looking.

The price-to-book value of a company is very important to value investors. It was a major theme in Benjamin Graham's book the Intelligent Investor and it has been very important to Warren Buffett throughout his investing career. Buffett has stated repeatedly that his number one investment rule is to not lose money and that his #2 rule is to remember rule #1.

When considering the purchase of shares in a company, knowing the book value or underlying value, minus any "good will," gives you a foundation on which to place some confidence. The book value is not the same thing as the break-up value of a company, which might be more or less, but they do have a relationship. The most important thing about understanding the book value is to have some idea of what the company is worth in a "fire sale." What is the company worth in its lowest common denominator. Ideally you want to pay something less than, or close to a book value of 1.0. Stocks with very high P/B ratios imply many intangibles and a higher degree of speculation in the stock price.

In his column "The Intelligent Investor" in the latest issue of Money Magazine, Jason Zweig offers some great tips for investors to "Stop worrying and stay invested" in the presence of a volatile markets. He also gives one of the best pieces of advice for trading that I have ever seen: "Wait for the bell. If the market is open, your portfolio should be closed. Later you can be more objective."

Don't worry about missing opportunities: All the research shows that frequent trading kills performance. Trading during the day will trick you into making impulsive investments, and make your regimen more gambler than cerebral. This also goes nicely with one of the best investing quotes of the year, from John Bogle's interview with the same magazine in March: "The stock market turns out to be a giant distraction from the reality of owning businesses, which is what investing really is. In the short run, expectations seem to drive the market, but in the long run nearly 100% of the returns on stocks come from the real market - the sum of dividend yield and earnings growth."

Zweig's advice is certainly something I plan to incorporate into my own investing. For more great insight from Zweig, buy the most recent edition of Benjamin Graham's classic book The Intelligent Investor, which has timely commentary from Zweig following each chapter.

A recent Wall Street Journal article blared Fast-Money Crowd Embraces ETFs, Adding Risk for Individual Investors. The article focused on the imperfection of exchange-traded funds as tracking devices for the indices whose performances they seek to mimic. The problem is that, because ETFs are traded like stocks, they go up and down based on supply and demand for the shares themselves. Traditional index mutual funds are simply adjusted at the end of each day to reflect the net asset value of the underlying stocks. As the article says:

The funds also are heavily used by the fast-money crowd such as hedge funds and big Wall Street traders. Combined with the effects of a 24-hour market and the unusual inner workings of ETFs, that trading can distort prices on days such as Feb. 27 and March 13 when the market swooned. Some investors who sold amid the turmoil got significantly less for their ETF shares than the underlying assets were worth.

It's quite true that this is a disadvantage of the funds -- if you decide to, like a lemming, dump your shares when everyone else is trying to as well. But history has demonstrated that panic-selling can only lead to disaster for investors. Where some might see disadvantages in the volatility of ETFs, savvier investors can profit from them. One strategy for avoiding being bitten by panic-selling in ETFs is to never buy when the price is at a substantial premium to the net asset value (the net value of the underlying securities held by the fund), nor sell at a large, one-time only discount. In funds that normally trade in a tight range around their NAV, these situations are signs of extremes in investor sentiment. When investors are dumping shares well below their NAV, that is a sign of panic.

As Benjamin Graham used to say "The secret of making money on Wall Street is to be greedy when others are fearful and fearful when others are greedy."

Having received many comments about my American Idol post (American Idol: Are Indian call centers skewing the vote?) and remaining puzzled about how a clearly out-classed contestant, Sanjaya, beat out several more talented contestants round after round to remain among the final twelve, I believe I now have come up with a plausible answer.

The answer can, surprisingly, be found in the stock market trends and the daily closing prices -- no kidding!

American Idol will start the countdown tonight from 12 hopeful singers down to the one happy winner. There will be surprises along the way just like in any kind of market. Voting will be with telephone calls and text messages instead of money, but to avid fans, the stakes for their favorites are high. We are told this is the top-rated show on television.

Remember the often quoted comment by Benjamin Graham? He said, "In the short-term the markets are like voting machines, but over the long-term they are like weighing machines." Well, in the short term strange things can happen but in the long term it should make sense. Not perfect sense, but close!

Anadarko Petroleum (NYSE:APC) is on my watch list. It closed today at $42.47 down 48 cents. It popped up on my screen when it hit my target of $42.00 per share and a price-to-earnings (P/E) ratio near 5; that's very low for this caliber of company.

So I took a closer look at some other factors. I already liked the fact that they are deeply involved in energy -- a currently undervalued segment of the economy. Half its oil and natural gas reserves are in North America and management has been making good decisions for a decade, so the track record is there. One decision I like was increasing its reserves and selling some Gulf Coast assets.

Anadarko has a 52-week high of $56.97 and is near it's low of $39.51. At 36% off it's high it is looking very tempting. Oil and natural gas prices are down significantly and APC's price reflects that; however, I'm thinking, do they go up from here, or down -- which is more likely? I say up eventually, and sooner rather than later. What do I get if I buy and hold? Maybe 'dead money' for six to nine months plus a small dividend yield of .83% or maybe prices rise and the stock just makes a small move up.

Every week it seems, my grandmother receives a catalog or three from Blair Corporation (AMEX: BL), which markets clothing and home products, mainly to older men and women. I had looked into the stock several months ago, but ultimately didn't buy it, even though it looked quite cheap. It had a yield in the 3% range, was trading close to its book value, and had low P/E and a price to sales ratio that was well below the industry norm. I didn't buy it because it looked like what is known as a "value trap" or, less charitably as "dead money." Read about companies like this on Internet message boards and you'll often find the acronym "POS." I'll leave you to decipher that one. Basically, I saw the stock as being undervalued but without any catalyst in sight to cause it to realize its value.

Today, Appleseeds Topco, a buyout outfit of some kind, agreed to purchase Blair for $42.50 per share, resulting in a 13.29% jump for this typically boring-to-watch stock. Was I wrong to pass on Blair? A look at the company's 5-year chart provides some evidence for my defense. Since 2002, the stock has fluctuated between 25 and a little over 40, and buying and holding the stock (assuming you weren't able to purchase it at its bottom) would have been unlikely to yield superior returns. Had you purchased the stock two years ago, you would have paid only a little bit below what the company was taken out for today. The main risk with buying these deep value, boring companies is the lack of a catalyst. If "buy and hold" is the mantra for growth investing, "buy and hope" might be the idea of deep value investing. The stock's under-performance for an extended period of time speaks volumes about management. I would even postulate that, most of the time, deep value Benjamin Graham type-stocks (low price-book) almost by definition have poor management.

And I say all this as a big fan of deep value investing, which you can learn more about in Benjamin Graham's classic The Intelligent Investor. To help to avoid the potential pitfalls of this often lucrative field of investing (David Dreman's book Contrarian Investing showed that buying low price-book stocks has historically outperformed the market by a wide margin over the long-term), I have a list of rules to screen out dead money, value-trap, POS's:

-Invest in companies where change seems imminent. If a company's shares are undervalued enough, activist investors may swoop in to try to shake things up. Keep track of 13-D filings (using the SEC's Edgar database) to find stocks where someone is accumulating a large stake. Then, research the investor to see what their track record is. Is it someone who has a history of launching proxy battles or persuading companies to put themselves up for sale?

-Look for signs of consolidation in the industry/broader market. When private equity firms are taking companies private at a record pace, many of these deep value stocks (like Blair) are well-positioned to be picked off.

-Look for situations where the management owns a large number of shares (this information can be found in the proxy statement). A manager with a large number of shares will benefit greatly from price appreciation. A manager with a large salary and little equity stake in the company may be happier to milk the company for cash and could care less about the stock price (former Lenox CEO Susan Engel says hi).

Do you have any of your own strategies for avoiding value traps? Post them here and I'll do a follow-up with your tips!

Quantitative analyst and editor of OTC Insight, Jim Collins sees opportunity in Steve Madden (NASDAQ: SHOO), a shoe designer whose products are distributed through department and specialty stores, its 95 retail shops and its e-commerce site.

Fundamentally, Collins is attracted to a recent new product launch known as the "Design your Own" collection, which lets buyers choose between the size of the heels and the patterns, materials, finishings and colors to customize their own shoes. Collins points out that there are a total of 4,221 possible combinations.

Technically, Collins looks to the stock's very high relative strength ranking of 98 out of 100 as well as its solid score of 'B' for accumulation-distribution. He does caution that the company is exposed to fashion risk, which he notes can be difficult to predict. Despite these risks, he has selected the issue as his latest featured investment.

Validea has an unusual approach to stock selection; editor John Reese assesses companies based on the strategies employed by "legendary investors." In the case of his latest buy, Finish Line (NASDAQ: FINL), the stock was chosen based on the value methodology used by Benjamin Graham (Warren Buffett's mentor) and Peter Lynch.