3 Ridiculously Cheap, High-Quality Companies

Even with the recent rally, it's ugly out there. Many companies that
overleveraged their balance sheets are permanently impaired and will
likely never fully rebound; exploding industrials such as General Motors (NYSE: GM) come to mind. We had an unprecedented boom; now we're in the middle of an unprecedented bust. That's how markets work.

Even so, history tells us time and time again
that market panics and forced sell-offs indiscriminately throw the good
out with the bad. The frenzy over financial markets, and the
"sell-now-ask-questions-later" mood of global investors, are creating
the kind of opportunities that bargain-hunting investors haven't seen in decades.

Using the wisdom of our 130,000-member-strong CAPS community, I've hunted down a few dirt cheap, high-quality companies. Have a look:

Data from Yahoo! Finance, Capital IQ, and Motley Fool CAPS, as of May 15.

All three are well-established companies. Let's break down the bullish argument for each one.

The power of plastic bins

Newell Rubbermaid
was slaughtered last year. First, manufacturing costs soared during the
commodity boom; then consumer spending plunged last fall.

Was a pullback in this company's stock deserved? Yes. But was the
ferocity and depth of that pullback warranted, and does it reflect the
true long-term value? Probably not.

That's especially true if the precursor to an economic
recovery comes from a sharp restocking of retail inventory. That'll
almost certainly occur, since inventory has fallen off a cliff in
recent months and will eventually succumb to pent-up demand. As CAPS
All-Star auron77 wrote in March:

Newell will out perform in the long term. They have
been hit badly with the retraction of the economy, mostly because their
main customers, Lowe's [ (NYSE: LOW)], Home Depot [ (NYSE: HD)] & Wal-Mart [ (NYSE: WMT)]
made drastic cuts to their inventory, along with the many little
customers that keep business flowing. When stores starting order normal
again Newell's free cash flow will increase by selling through product
quicker and emptying warehouses. 

Has cash, wants to spend it

Microsoft
is a similar story, albeit with products slightly more complex than
rubber bins. At $20 a share, you're looking at an industry titan with
more money than it knows what to do with, trading at a multiple that most wouldn't have thought possible in recent years.

Like Newell Rubbermaid, pent-up demand could provide some real fuel
for this company in coming years. In Microsoft's case, that demand will
be bolstered by its newest child, Windows 7. Here's how CAPS member Scoubi recently put it:

I can't see the corporate world go to another OS
right now. Even if home users are likely to go to Mac or Linux, those
OS aren't ready for corporate use right now. Mac hardware is too
expensive so they can't replace all the PC they have. Linux is fun to
use at home but too complex and not yet ready for corporate use even if
it gets better every year. Maybe in 5 years we'll start to see small to
medium [businesses] switch to Linux.

So with only Windows as a viable option,
[businesses] will have to switch to Windows 7 within 2 to 4 years. That
should increase revenue for sale and also for support and training as
everything will be "new".

Lay off my Oreos

Last but not least, food giant Kraft
is the epitome of a stable company selling a product you literally
could not live without: food. And don't tell me you can live without
DiGiorno pizzas -- I've tried it, and I wouldn't wish it upon my worst
enemy.

That said, Kraft is a stable and sturdy company being priced for
mediocrity. The 4.7% dividend alone is enough to make this stock worth
your while. Factor in a respectable growth rate -- which it does
deserve -- and you're looking a decent upside without a lot of risk. As
CAPS member grammiser writes:

One word -- Safety. People have to eat and will find
the means to do so. We're not out of the recession woods yet and could
have some disasterous surprises yet to come in this market. It won't
make me rich but it will guarantee some capital should we have another
steep market drop.

Your turn to chime in

Have your own take on any of these companies? More than 130,000 investors use CAPS to share ideas and swap opinions. Click here to check it out and speak your mind. It's 100% free to participate.

For related Foolishness:

• This Rally Is Ridiculous
• Buffett's Wrong: 5 Companies That Beat His
• 3 Bargain Stocks for This Market

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