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3 Stocks Warren Buffett Could Love in This Market

Using the P/E Gap as a measurement for value

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warren buffett 630 headshotSome of the best minds in the business believe that stocks are fairly and fully valued today.

Warren Buffett was the first making the pronouncement. The Oracle of Omaha known for his value style of investing isn’t seeing many buying opportunities at the moment. Next up is famed hedge fund manager Julian Robertson. He too sees a market at full price with little room for improvement.

Then there is little report from Societe General (SCGLY); it says the market is likely to plunge in early 2014. Citing market prices that have reached a peak with nowhere to go but down, the bank says that Federal Reserve tapering will be the trigger for 15% move lower.

I suppose we should just throw in the towel and pack it in until things change.

Wait! Time to Go Micro

No hold on just a minute. These proclamations from some impressive sources may be scary and all, but they are macro in scope.

That means there are several micro stories that can do well irrespective of what happens with the rest of the market.

For example at the end of August, I found a little stock called INSYS Therapeutics (INSY) The company showed up as a top-rated stock using a stock-rating system based on something I call the P/E Gap – the difference between a stock’s P/E ratio and its expected profit growth rate.

Since Sept. 1, INSY is up 78% as of early trading on Oct. 8. Those are huge gains and gains that can still be found in a market that is supposedly fully valued.

The PE Gap approach works because it identifies micro opportunities based on pricing inefficiencies. These pricing inefficiencies ultimately get corrected with the end result on the long side being significant gains.

Here are three stocks that are highly rated according to my P/E Gap approach ready to zoom higher in a fully valued market, and would make Warren Buffett sit up and take some notice:

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