In a Jittery Market, Can You Become a Vulture Investor?

Every time Wall Street gets bloodied by another market selloff, some investors start circling over the carnage, looking for bargains.

These so-called vulture investors--speculators not averse to a little risk and with cash in their pockets--are viewing the current crisis, spurred by the fire sale of Bear Stearns, as another opportunity to buy up stocks and other assets on the cheap.

Though vulture investing is primarily for those with very deep pockets--think Warren Buffett and Wilbur Ross--the average investor can mimic some of their moves and look for beaten-down stocks that are undervalued.

"For mid-sized investors it would make sense to start to look at fixed-income investments that are substantially below value," says Michael Kresh, of M.D. Kresh Financial Services. "We expect over the next week or so to start for our clients putting our money into fixed-income investments."

Kresh favors municipal bonds trading at significant discounts. Munis have had their detractors lately as some have failed to find much of a market, but Kresh believes that "the big money's going to follow Buffett's lead" into the high-yield bond market.

"An investor that has a million or two going into that area is taking on risk not so much that it's going to be wrong, but the risk is patience," Kresh said. "Mr. Buffett has the ability when he buys into something he can hold it for years until it gets to where he wants it to be."

Financials have become a popular place for those betting that the sector is near a turnaround. But with the Bear Stearns news hitting the market and uncertainty and volatility sure to be ahead, money managers are counseling their clients either to stay on the sidelines or look long-term.

"You should not be looking at having financials as part of your portfolio at all until some of the dust settles," Kresh said. "Anybody who's not going to be able to hold here is going to be shaken by the volatility, which is not going to go away at least for the next couple of months regardless of what the Fed does."

For those counseling equities, the advice also is geared more towards funds than individual stocks.

Randy Carver, president of Carver Financial Services, an affiliate of Raymond James, backs mutual funds including Hartford Capital Appreciation and ING Global Real Estate , as well as the iShares ETFs.

"For smaller investors I don't think you should make changes to your portfolio because of the market," Carver said. "I do think you need to reassess your risk dollar."

That appetite for risk can be a boon for those making the right choices in a down market. Chris Mayer, editor at Capital & Crisis, is looking at several moves right now that he thinks would be prudent in this market, and he's willing to take a ride on some stocks.

"There's probably going to be some forced liquidations. You've got hedge funds unraveling, selling things they don't want to sell. I think you're going to see some really screwy prices over all this," Mayer said. "I have a feeling it will be one of those things where people will say I wish I would have picked up 'x' back then."

Mayer likes Graco , a diversified machinery company that he said is trading at a cheap 14 times earnings and has excellent profit margin.

He also sees value in some of the energy companies, including Canadian Natural , which is beginning a drilling project in the nation's oil sands territory this year, as well as ConocoPhillips , though he cautions about more refining troubles.

Mayer further recommends base metals, including copper, with Lundin Mining as a stock choice for a metals company.

But not everyone is as enthusiastic about putting new money in the market.

"If you have a long-term horizon maybe nibble in. Save some ammunition in case the rest of the week's news is poor," said Dave Rovelli, managing director of equity trading at Canaccord Adams. "I don't see anything to gain by getting in here now."

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