Why Warren Buffett Is Buying

These 10 healthy companies, despite depressed stock prices, could be long-term winners.

Billionaire investor Warren Buffett, Chairman and CEO of Berkshire Hathaway Inc., participates in a discussion during the 2008 Women's Conference in Long Beach, Calif.

Warren Buffett's optimism hasn't exactly moved markets lately. Since Buffett announced in mid-October that he is bullish on U.S. stocks, the markets have fallen, not risen. Buffett's not complaining—he can buy even lower.

But that's little comfort to the rest of us. In a recent New York Times article, the legendary investor made it clear that he's not making any predictions about whether the stock markets will rise or fall in a month or a year. Instead, he has long pointed out that it's smart to invest in healthy businesses that provide something people need and appear to be undervalued—as long as you have the time to wait around until the stock rises to its deserved price. Of course, when you're a billionaire, it's easy to wait. When you're a working parent or a pensioner, it's not.

But Buffett isn't the only one talking about companies whose share prices are severely depressed, with good chances they'll rebound sharply once the economy stabilizes. Many analysts think the recent run on the stock markets has dragged down a lot of companies with generally good prospects. "There are a lot of undervalued companies," says Kevin Matras, an expert stock screener at Zacks Investment Research. "We're throwing out the baby with the bath water."

Buffett doesn't usually announce ahead of time which companies he plans to invest in, so I asked Zacks to identify 10 large American companies that appear to be much healthier than their stock price suggests. In general, these are companies with a market capitalization of $1 billion or more, good earnings prospects, and favorable analyst ratings. (View our complete methodology.) Even if you're not an active investor, examining a few healthy companies might dispel some of the gloom shrouding the overall economy:

Agco (AG). Rising demand for ethanol and the corn from which it is made should boost farm incomes and the demand for tractors. This should benefit Agco, a farm-equipment producer. The company has strong business in most parts of the world, including Europe, Africa, the Middle East, and South America.

  • Recent share price: $24
  • Since January 1: down 64 percent
  • Arch Coal (ACI). Recession or not, the second-largest U.S. coal producer may post its best results ever in 2008, with strong third-quarter earnings that beat analysts' expectation. It helps that Arch focuses on higher-quality, low-sulphur coal and follows a flexible strategy that allows it to ramp up production when higher prices mean better returns.

    • Recent share price: $18
    • Since January 1: down 60 percent
    • Big Lots (BIG). Shoppers always want a bargain, especially when the economy looks scary, as it does now. That makes this a boom time for Big Lots, which sells closeout and overstocked merchandise at cheap prices. It's one of the few stocks that have actually risen during the market swoon.

      • Recent share price: $20
      • Since January 1: up 29 percent
      • BP (BP). Whatever the price of oil, the world is going to need lots of it for many years, one reason this huge oil and gasoline provider should continue to see strong profits.

        • Recent share price: $41
        • Since January 1: down 42 percent
        • Bunge (BG). A sharp downturn in global food prices has hurt the share price of this global agribusiness company. But its core operations are still strong, and recent write-offs like a big foreign-exchange loss may be one-time events.

          • Recent share price: $31.50
          • Since January 1: down 74 percent
          • Dish Network (DISH). A recession might crimp TV sales for a while, but this satellite TV service will benefit from a leading position on HDTV and digital recording technology. Potential bonus: If worried consumers go out less, they're likely to watch more TV.

            • Recent share price: $16
            • Since January 1: down 50 percent
            • Enbridge Energy (EEP). No matter what the price of oil or gas, it needs to move through systems like Enbridge's distribution network. And if there's expanded offshore drilling or other oil and gas exploration in North America, Enbridge's extensive pipelines are there to transport the results.

              • Recent share price: $24
              • Since January 1: down 50 percent
              • Fossil Inc. (FOSL). Even in a recession, you need to know what time it is. And Fossil's fashionable, reasonably priced watches and other accessories are a good fit for a thriftier era.

                • Recent share price: $16
                • Since January 1: down 40 percent
                • Radioshack (RSH). The prospect of weak holiday sales has depressed the stock, but this consumer-electronics chain sells staples like cellphones, computers, and AV equipment that consumers want no matter how gloomy they are.

                  • Recent share price: $11.50
                  • Since January 1: down 31 percent
                  • Warnaco (WRC). Consumers are cutting back on spending, but strong clothing brands like Calvin Klein, Speedo, and Chaps should hold up better than most. It helps that Warnaco sells many of its wares through discount retailers like Kohl's, Costco, and Wal-Mart, which should fare better than pricey competitors during a downturn.

                    • Recent share price: $24
                    • Since January 1: down 27 percent