Heirs Apparent With Mouth-Watering Prices

• ByTim Melvin, RealMoney.com Contributor
• On 1:16 pm EST, Monday December 8, 2008

In a recent interview, Jeremy Grantham summed up the conundrum that is the current stock market: Many assets are so cheap you almost have to buy them.

In all likelihood, the stock market is going to go lower -- Jim Cramer has pointed out repeatedly on RealMoney that the cheap can indeed become incredibly cheap. However, stocks in good companies like Darling International and Hilltop Holdings are selling for prices that are hard to resist.

Watch where the money is going to flow in the next few years: The incoming president gave another speech last week outlining his plans to create jobs and rebuild the economy, describing the largest infrastructure spending program since the 1950s, when the interstate highway system was developed. He has plans to wire schools and hospitals for Internet access. With a majority in Congress supporting him, he is going to pass and enact his plans, whether you are a fan of Keynesian policies or not.

With so many stocks so cheap, it makes sense to find cheap stocks that will be recipients of the government's largess in the next four years. I have talked endlessly about the infrastructure companies and the opportunities in that area. I would be adding to positions in well-financed companies in the infrastructure space on the inevitable down days.

However, it's important to take a long-term focus and tiptoe into positions -- more than ever, avoid debt-laden companies that may struggle to meet interest payments in 2009 and be forced to reorganize. There are a lot of high-quality companies with little or no debt where you can invest your money.

Even as the market has sold down, we have seen stocks like Granite Construction and LB Foster recover from the October carnage. Foster Wheeler is off its lows, but the stock is still down more than 70% in the last year. This company has a global presence in key infrastructure markets and more than $1 billion on its balance sheet. It carries some debt, but less than 20% of the cash available -- it could be paid off tomorrow with around $900 million remaining in the bank.

The Internet bailout opens some interesting possibilities as well. Corning appears cheap -- the company provides the wire, fiber optic cable and components needed to wire up schools and hospitals, and manufactures the glass substrates for LCD screens as well. Once schools and other community locations are wired, they will need computers to access the net. Corning has twice as much cash as it has debt, and is positioned to withstand the ugly economy and prosper under the spending programs proposed by the next president. ARRIS Group , another telecommunications equipment company with more cash than debt on its balance sheet, also could see a strong pickup from the initiatives through its connectivity and broadband products.

There are a lot of cheap stocks out there right now, and it makes sense to focus on those that will be in a position to profit from the new economic policies.

On a side note: Having returned early from Siesta Key to a cold, blustery Maryland, the only warmth I can find is in the afterglow of yet another victory by Navy in the most important football of the year. I am always in awe of the young men and women who attend our service academies -- they are among the best and brightest students and could have gone to almost any school in the nation but instead of lucrative careers in the private sector after school, the chose years of service to their nation. I salute them all, but being from Annapolis, I root for Navy.

Buzz up!