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Analyst Watch: Getting the Value Out of Value Stocks

U.S. stock index futures pointed to a flat open Friday after three straight sessions of gains for the major averages and ahead of the start of third-quarter earnings season next week.

The three-day rally had the Dow Jones Industrial Average and the S&P 500 on track for their biggest weekly gains since July of last year, with the Nasdaq's weekly gain likely to be its best since October.

Here's what guests on today's Squawk on the Street are watching before the opening bell:

Value Stocks

Kent Croft, CIO and portfolio manager for Croft Value Fund, says value investing is a good overall approach and now is a good time to be looking for opportunities. To avoid value traps, however, valuation screens such as low P/E ratios are helpful but you need to do your homework, he says.

Generally, cheaper valuations can be less risky (damage already done), he says. Essentially, it's easier for a stock to go from 40X to 10X than 10X to 5X earnings.

So which stocks does he like that are trading at less than 10X 2010 estimated EPS that he thinks offer a lot of value for the long term?

Pfizer
$119B Market Cap
P/E ratio: 6.8X 2010E EPS
Dividend Yield: 4.9%

ACE Limited
$17B Market Cap
P/E ratio: 7.3X 2010E EPS
Dividend Yield: 2.5%
Trades at 80X Book Value

Freeport McMoRan
$29B Market Cap
P/E Ratio: 8X 2010E EPS
Dividend Yield: 1.9%

Chevron Corporation
$140B Market Cap
P/E Ratio: 8X 2010E EPS
Dividend Yield: 4.1%

MetLife
$32B Market Cap
P/E Ratio: 9.2X 2010E EPS
Dividend Yield: 1.9%
Trades at 90% of Book Value

See more of what these and other analysts and money managers have to say, and get the latest financial news. Watch Squawk on the Street every weekday morning starting at 9 a.m. ET.

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Disclosure: Kent Croft owns shares of the companies mentioned above through shares in the Croft Value Fund (CLVFX)

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