Back in the summer of 2010 when the market was down, the gulf was full of spewing oil and investors were running away from bad news stocks shocked most notably by BP (BP) oil spill, I decided to post a contrarian story reminding readers that the fear was overblown and created a buying opportunity.

"My pal Warren" has said for years that we should buy on fear and sell on greed. The toxic stock portfolio was a result of this sentiment.

This is the fourth update to my ranting eight months ago that acquiring six of the most hated, and most highly traded stocks with constant negative headlines would outperform the overall market. The theory has born fruit as the toxic stocks are ahead and the difference is increasing over time.

In case you need to be reminded to look closely at the books, today's poster boy for erroneous ledgers, Bernie Maddoff, should be a constant reminder. Furthermore, when you are looking at the books, remember that Benjamin Graham, mentor to "my pal Warren," advised buying stocks for less than their intrinsic value. And book value is the starting point in attempting to establish that.

Two weeks ago, I posted an update on my toxic stock picks. These were six unloved stocks where I felt the stage was set for market beating returns. The same is true again for today's market-beating group, although it is not the headlines that tied this group together, but their standout bargain metrics.

The endless oil rising from the floor of the Gulf of Mexico has sunk BP (BP) stock; investors fly away, while the vultures are circling above.

It is sad to learn of BP's poor adherence to basic safety precautions and the conflicts between managers on the drilling rig. It appears from the news reports that have trickled out that this mess was created by more than damaged equipment and poor decisions. The actual decision-making process on the leased Transocean (RIG) platform was faulty from the beginning. Sadly BP is not alone in this regard -- just the most recently exposed.

One of our regular readers, Dan B., asked me Monday morning if I thought British Petroleum p.l.c. ADS (BP) was a buy, given how much it has collapsed in the wake of the Gulf of Mexico oil spill resulting from an explosion on a Transocean (RIG) deep water drilling vessel that killed 11 people, who have yet to be found.

The oil spill is certainly a black swan as it was only a short while ago I recommended Transocean and RIG has been clobbered along with BP.

Dan, no doubt, is aware that the stock market pendulum often over-swings the mark and is wondering if now is the time of opportunity, or will it come later? To buy, or not to buy, that is the question.

Diamond Offshore Drilling (NYSE: DO - option chain) shares have been just about flat today after Standard & Poor's (NYSE: MHP) announced that the company will be added to the S&P 500 Index on a date still to be determined, replacing Weatherford International Ltd. (NYSE: WFT). This usually causes a surge in stock value as all the ETFs that track the S&P 500 now have to rush to add DO positions.

While DO is not rising today, it is also not falling sharply like the rest of the market, especially when compared to its peers like Transocean (NYSE: RIG), which just reported slowing earnings today and is down by more than 5%. If you think that DO won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on that stock.

Oil prices have definitely been gushing recently. Lately prices have been spiking due to the ongoing tensions between Iran and the West, but even before the recent flare with OPEC's second largest oil producer prices had started to climb.

After last summer's oil bonanza that saw prices head up to $80 a barrel, we saw quite a bit of cooling off in the oil market. As we headed into 2007 prices had fallen roughly 25% since the prior summer's highs and we were looking at $60 oil. At that time it looked like oil had taken about all the pain that it was going to, but then January opened our eyes to even further declines, in fact, much larger declines. On January 18 prices hit a 20 month low at the time of $50.25, roughly a 16.5% fall in the first two week of trading.

Since then we have seen prices head back toward $60 and have stayed for the most part between the high $50's and $60. Then troubled started up again with Iran and the last week or so prices have taken off again. Currently we see oil being priced at $65.76 after shooting up $1.68 today. So basically we have seen a 31.5% surge in prices over the last two months.