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Tickers in this Article: DIS, GE, IR, WY, TXT, T, VZ
Given the continued devastating collapses in many of Wall Street's financial titans, it's quite understandable the stock market remains in a fearful state. History has taught us that the panic will inevitably subside and eventually pave the way to the next bull market, but the million dollar question remains pinpointing when this will happen.

At a recent investment conference, Barron's writer Michael Santoli, who currently pens the popular Streetwise column for the weekly financial publication, offered his thoughts on why the market may be finding a bottom at current levels. Below is a summary of the high points of his talk, with some recommended insights on how to take advantage of Mr. Market's currently panicked state.

Nowhere Left to Hide
Santoli suggested that markets don't typically hit bottom as long as there are still places for investors to park their capital and wait out tough market conditions. He cited the rapid reversal of price appreciation in the commodities space of the market as a sign that pockets of strength are becoming harder to find, indicating there is nowhere left for the "fast money" (read: hedge funds) to hide. Struggling international stock markets offer another indication of an inflection point, considering emerging markets have started to fall significantly after more than five years of steady, double-digit gains. (Get the full story on this risky asset class in Re-evaluating Emerging Markets.)

Price-to-Sales Signpost
Santoli also cited a couple of market metrics as indicative that the market may not have much further to fall. For instance, market wide, the price-to-sales ratio is currently under 1.3, which is 15% below the level it reached in 2006 and, if the most recent bear market is any indication, is at a similar level to when the market bottomed in 2002. This measure could be somewhat stronger than earning-related ratios given the bottom line tends to fluctuate more with the ups and downs in the business cycle, making the P/E a less reliable measure during extreme highs and lows in the market.

Build up of Liquidity
Judging by the growth in short-term money market funds, the average investor is increasingly becoming averse to investing in stocks and bonds. The Investment Company Institute tracks mutual fund flows and recently published data showing money market assets have grown almost $315 billion so far in 2008, bringing total net assets to approximately $3.5 trillion as investors shift assets from stock and bond funds. Santoli estimated that cash could move more aggressively back into the market on another downturn given the signs it is starting to already look oversold. (To learn more, read Are Money Market Fund Risks Worth It?)

Companies to Watch
The credit crunch may be far from over, which makes the financial industry one of the more risky places for investors to allocate capital to right now. But taken as a whole, Santoli is correct in that there are signs the market has priced in many of the risks of further financial turmoil and slowing growth in the global economy. Better yet, there are pockets of the market that are starting to look downright attractive, with a number of potentially compelling individual stock opportunities for astute investors.

Santoli cited blue chips as a class with a favorable risk/reward tradeoff at current levels. He specifically mentioned media stocks such as Disney (NYSE:DIS), which is trading at one of its lowest valuations in recent memory. General Electric (NYSE:GE) was another mention as he didn't believe the market was giving it enough credit for its many above-average businesses. The market is punishing GE further today given its sizable GE Financial business segment.

Bottom Line
I count the above names on my growing watch list and also have Ingersoll-Rand (NYSE:IR), Weyerhaeuser (NYSE:WY) and Textron (NYSE:TXT) pegged for further research as they hover close to their 52-week lows. The same goes for AT&T (NYSE:T) and Verizon (NYSE:VZ), rounding out an interesting list of industry-leading blue chips that are weathering the current financial and economic uncertainty quite well. They also stand a good chance of outperforming the market given their appealing valuations and favorable prospects once business conditions improve.

For related reading, check out Widow And Orphan Stocks: Do They Still Exist?

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