In today's market environment, risk levels have become elevated. Most equity investments today are fairly valued at best and will require a continued upward move in the market to compensate the investor for the risk incurred. While current valuations are not at nosebleed levels, they are not cheap either. This market dependence is not worth the risk incurred.

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Develop Ideas
In moments like this, investors should devote their efforts to finding and developing ideas for the future. Stock prices won't go up forever and the longer they remain elevated, the more significant the pullback. When that occurs, the investor who is ready and armed with a quality watch list will be ready to take advantage of any short-term opportunities to buy at an attractive price.

SEE: The Value Investor's Handbook

Trinity Industries (NYSE:TRN) is one such name. Trinity is a diversified business that makes rail cars, barges, asphalt, and various other steel products for the infrastructure and transportation industries. Shares are close to its 52-week lows, and revenues are growing while backlog continues to strengthen.

Patience Creates Opportunity
As one of the largest producers of ammonia for fertilizer use, CF Industries (NYSE:CF) is another one to watch. Shares are at $190, slightly below the high of $203. The company is expected to significantly grow profits over the next few years as the fundamental demand for fertilizer use looks solid. For what it's worth, shares trade for 9-times forward earnings based on future analyst estimates. If commodities continue to slip in the short term, CF is a name to keep a close eye on.

SEE: 4 Cheap And Safe Stock Picks

Shares in oil giant ConocoPhillips (NYSE:COP) already look cheap today. Shares have dipped to $54 from a high of $80 as the price of oil has also declined from its high this year. At current prices, COP trades for under 8.2-times forward earnings and yields a solid 5%. Further price declines could make the valuation look even better.

Shares of Transocean (NYSE:RIG), one of the largest providers of oil rigs, are still at depressed levels from the Gulf of Mexico oil spill over a year ago. The fundamental picture for RIG remains unchanged, however. Demand for its deepwater drilling rigs remains strong as major oil companies focus all major exploration efforts in deeper waters. Shares are trading at $43, down from $65 this year. Even with the spill issue, if shares continue declining, the risk may be worth the value.

SEE: A Primer On Offshore Drilling

Bottom Line
Risk should always factor into any investment decision. Today's higher stock market valuations increase the level of risk assumed by investors. Keep an eye on today's quality company's for any future opportunity to investment at better prices. Price paid confers value received and risk assumed.

Tickers in this Article: RIG, TRN, COP, CF

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