By Dan Ferris in the S&A Digest:

Since March, lower-quality small-cap stocks have outperformed higher-quality large-cap stocks by a larger percentage than at any time since 1933. That's what the New York Times said last weekend.

Ford Equity Research, an independent research firm based in San Diego, rates stocks based on financial quality. Since March, the bottom fifth of quality has risen 152%, versus the top fifth, which has risen just 66%. That spread is wider than at any time since the bull run that began in February 1933, during which small caps beat large caps by an incredible 196 points.

I've been talking about the cheap valuations prevalent among World Dominating businesses ever since I recommended Wal-Mart at 11 times pretax earnings in the October 2006 issue of Extreme Value. Since then, gurus and famous investors from Joel Greenblatt to Jeremy Grantham to Warren Buffett have developed the same viewpoint. Buffett, for example, bought ExxonMobil recently, a stock I've been high on for two years.

Now, even the World Dominators are getting out of buying range. Only two members of the Extreme Value World Dominators list remain under their maximum buy price, and one of them is within pennies of its limit. One of them is the safest credit risk in the world among publicly traded equities. It's up nearly 100% off its March bottom, yet it's still cheap enough and earns enough free cash flow to finance enough debt to buy itself.

Otherwise, you'd better be careful buying stocks of any kind these days. The U.S. market trades for an astounding 32.5 times earnings and yields a paltry 1.8% in dividends. Most people I know would laugh at a deal that might double their money in 32.5 years if everything went swimmingly.

Crux Note: The S&A Digest comes free with a subscription to Dan Ferris' Extreme Value.  It's one of the best advisories you can buy at any price, and a true "must read" for serious investors.  To learn more - and get Dan's top investment recommendation today -   click here.

More from Dan Ferris:

This powerhouse stock will thrive in a weak economy

Your bank is using you... and encouraging reckless behavior

Dan Ferris: The most important investment lesson I ever learned