By Dan Ferris in the S&A Digest:

[Since March] junk stocks (stocks below $5) have outperformed stocks above $50 (higher-quality stocks) more than they have in any speculative rally, according to Jeremy Grantham of Grantham, Mayo, Van Otterloo (www.gmo.com). Junk stocks have beaten quality stocks by 90.9% since March.

Thus do we witness the spectacle of junky little stocks like Diedrich Coffee, which is unable to make any money selling coffee, valued at 2.3 times sales and 14.6 times book value, up more than 11,000% off its March bottom...

... versus Procter & Gamble, the No. 1 consumer-products company in the world, with 23 billion-dollar brands and 18 $500 million-plus brands, which has raised its dividend every year for 53 years. Procter & Gamble is selling for less than 14 times next year's earnings estimate.

Sell junk. Buy quality. That's the only odds-on bet left in the stock market right now.

Crux note: Dan Ferris is the editor of Extreme Value. For serious long-term investors, it's one of the most useful advisories you can buy for any price. In Extreme Value, Dan has a class of companies he calls "World Dominators" - high quality stocks with tons of upside. Learn more about Extreme Value here...

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