The members of the Forbes Platinum 400–the best big companies in America–meet some tough standards for return on capital and other performance measures. A handful of these companies are also on Wall Street’s discount rack.

One example: Safeway, which operates 1,775 supermarkets throughout the country. Yes, bargains often come with a catch: In Safeway’s case, there are concerns about slowing sales trends and slipping gross margins. Investors have also fretted the Pleasanton, Calif.-based food retailer will get crushed as Wal-Mart Stores moves more aggressively into the grocery business. Safeway stock trades 51% below a 52-week high.

At its recent price, however, Safeway goes for just nine times earnings per share for the past 12 months, versus a five-year historical multiple of 22. The average P/E for its Platinum industry group peers is 17. If Safeway can ward off the challenge from Wal-Mart, the stock could move closer to its historical valuation, or at least its industry average.

Another encouraging item is Safeway’s price-to-earnings-growth ratio, or PEG. Analysts reporting to Thomson Financial/IBES expect Safeway to post long-term annualized earnings growth of 12%. The stock’s price-to-earnings ratio (P/E)–calculated using projected next 12-month profits of $2.55–is 9, which gives Safeway a PEG of 0.8. A PEG below 1.0 often signals a cheap stock.

To find similar bargains, we looked for Platinum companies with multiples for price-to-sales, price-to-book value and price-to-cash flow below the averages for their respective industries. We dropped stocks with latest 12-month P/Es over 20. The seven stocks below carry an average estimated 2003 P/E of just 11, well below the S&P 500′s multiple.

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Let’s hope misery loves company. You may have had a bad year in the market, but the contestants in our annual stock picking contest have had a positively rotten one. Our bulls merely tracked the market, with an 18% loss over the past 12 months, while the bears saw their short-selling picks go the wrong way, rising 17%.

For the past two decades we’ve made an annual ritual out of asking a few brave investment professionals to go on the record with one stock to own or to short. Twelve offer up a buy, five a short-selling candidate. Winners get a return invitation. During the previous five rounds, the bears have done well on the whole, averaging a return 23 points worse than the market. As for the bulls in the prior five years, their picks have lagged the market by 4 points.

So what went wrong in 2002? For the bulls, the rebound in technology stocks never quite showed up the way a few thought it might. Nor did one analyst’s bullish call on Enron help matters. For the bears, expectations of disaster for the likes of Eastman Kodak didn’t quite happen.

There were a few standouts. The star bull: Jean-Marie Eveillard, a fund manager with First Eagle SoGen Funds. Eveillard bet on Security Capital, a holding company for real estate investment trusts. In May that firm was acquired by GE Capital. The deal entitled Security Capital shareholders to cash and fractional shares of ProLogis, an Aurora, Co.-based REIT. Eveillard’s pick was up 41% over the 12 months to Oct. 31.

For 2003 Eveillard returns with Tyco International, maker of things ranging from electrical components to security systems–and bedeviled by accounting questions and former chairman Dennis Kozlowski’s indictment. “A controversial company,” he muses, “but real businesses.” Eveillard says Tyco, if carved up and sold to other companies, would be worth $25 a share.

Full story at Forbes.com