My nickel's worth.
I typically buy companies paying dividends which are consistently generating cash, trading at low price/book or price/sales ratios, and which have very little or no debt. I don't believe in chasing things like PEG ratios which are tied to some analyst's guess of future numbers, or the obsessively worshiped P/E which is pretty much worthless, since earnings are a fictitious number a company can inflate by playing numbers games or spinning off subsidiaries to shift liabilities making them look like equity (remember Enron?).
Tangible assets minus debt gives a sense of the brick and mortar value of a company, yet a quick search shows there are plenty of companies with a franchise more valuable than their office furniture you can find trading at close to or even less than the net value of their assets. Often such companies are trading at low valuations because they took a temporary earnings bump which caused a selloff of the shares (did I mention Mr. Market is overly obsessed with the one number, P/E).
I don't follow this method because I'm trying to impress anyone or even beat the market. I'm following it because it's a model I can understand, and it's pretty similar to how Warren Buffett and other value investors go about analyzing securities.
Tech is attractive right now. Usually anything tech related will trade at insane multiples because of over-exuberance, somehow people think tech companies will somehow magically grow faster than other brick and mortar businesses (they don't) and will pay more for such a fallacy. HPQ and INTC are currently trading at multi-year lows, yet they are solid performers. Intel keeps setting new records for generating cash, yet every time they announce earnings they take another beating because the bear market thinks we're in for the next great depression when they listen to the future earnings outlook (boo hoo).
Manufacturing took an unfair beating because of high commodity/supply side cost inflation. Now that inflation is stabilizing and the outlook isn't looking as bad as the consumer confidence index would lead one to believe (those numbers would make you think we just had a nuclear war), I think these stocks will be poised for a comeback. Maybe not this year, or next, but I am not in this to make fast money, am I.
Energy companies are going through a bear market after a huge bubble around 2005. I am stymied by how Exxon and other oil companies are trading at 9 times earnings and nearly book value while they are raking in the largest profits of any company in history! It's almost as if the market HATES them for making more cash than they could drive to the bank in a convoy of semi trucks. A bunch of solid utilities paying great dividends are trading at less than book value. Recession going to hurt their earnings? I think not, and with oil prices stabilizing they will return to excess profits (raise the rates as costs go up, keep them the same as costs drop).
Avoid financials, avoid retail, most of all avoid any companies which are over-leveraged. The runup of borrowing costs in the credit markets is going to kill any company which is short on cash. I think we're going to see a string of large companies going bankrupt because they suddenly find they can't get the credit they relied on to run their business. Anyone buying stocks of companies because they look "cheap" while overlooking the debt load is facing a potential 100% downside for a minimal upside. The value investor's most important goal is to preserve capital.*
* footnote: I dabbled in WM as a risky bet when it was at $5 knowing I could lose it, or get a 4x gain if they made it. I lost the bet and lost it all. But I treated it as a bet. It was outside of my normal strategy, and was made with capital I could afford to lose (a bonus).