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Several of Canada's most prominent value investors see bargains amid stocks beaten up in the recent market turmoil.

While the S&P 500 soared 3.4 per cent Tuesday, largely on expectations that U.S. Federal Reserve chairman Ben Bernanke will announce additional stimulus measures this Friday, the managers aren't betting on another round of quantitative easing to buoy stock prices.

Rather, they believe that several stocks have now fallen to levels that make them attractive on fundamental measures, such as dividend yield, earnings and cash flow. As a result, they're tapping into the large reserves of cash they've built up in recent years and snapping up stocks they believe are good long-term holdings, no matter what the market does from here.

"This is a good time to buy, and not be afraid to average stocks down," Francis Chou, founder of Toronto-based Chou Associates Management Inc., said Tuesday. "You cannot time the market."

Mr. Chou, who recently pared the cash in his U.S.-focused Chou Associates Fund to 20 per cent from 30 per cent, has been buying U.S. financial stocks and retailers.

While he would not discuss specific purchases, his fund's holdings at March 31 included warrants on Bank of America Corp. and Wells Fargo & Co. Warrants are options to buy a stock at a preset price.

Mr. Chou once avoided many U.S. banks because of their opaque financials and alarming use of derivatives, but he believes that the U.S. government is unlikely to let major financial institutions fail, while surviving banks will benefit from any economic recovery.

Fund manager Vito Maida has also been focused on buying U.S. financials as well as technology stocks, but has been avoiding Canadian securities because he still sees risk in the domestic market.

U.S. stocks could also go down further, but "as the price goes down, we average down," said Mr. Maida, founder of Toronto-based Patient Capital Management Inc.

Mr. Maida recently slashed the cash in the portfolio he runs for wealthy individuals and foundations to 45 per cent from 60 per cent, while he has now invested the 20 per cent of cash he was holding in his Horizons AlphaPro North American Value exchange-traded fund (ETF).

While he did not name his recent purchases, financial and technology stocks in his ETF at the end of July included names such as U.S. Bancorp, Hewlett Packard Co., Cisco Systems Inc. and Intel Corp.

Investor Irwin Michael has also been nibbling away at hard-hit North American stocks, and still expects the markets to turn in high single-digit or low double-digit returns this year.

"We think there could be a fall rally and maybe even a Santa Claus rally towards the end of the year," suggested the president of I.A. Michael Investment Counsel. "We believe fundamentally that the market is oversold so we would not be surprised to see market reaction on the upside."

"The fact is that stocks have been pummelled at this point, and in a number of cases are very cheap," said Mr. Michael whose ABC family of funds are now sitting between 5 and 7 per cent cash.

Some stocks are trading below book value and working capital, he said "We are also finding stocks that are yielding 3 to 6 per cent, whereas in the money markets, you are getting 1 per cent. And [in some cases] the bonds of a company are trading at a lower yield than its dividend yield."

For instance, he recently bought Nasdaq-listed Flexsteel Industries Inc., which makes furniture for the retail, office and recreational vehicle market. The company is profitable, has no debt, is sitting on cash, and its stock trades at less than its book value of over $19 (U.S.) a share and working capital of $15 a share, he said. Moreover, "it pays you a dividend yield of 2 per cent while you are waiting."

Savanna Energy Services Corp., Equitable Group Inc. and Danier Leather Inc. are among other stocks that he owned before the recent downturn. He considers them to be still cheap. "Volatility is rampant, and in many cases investors are throwing the baby out with the bathwater," he said.

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