3 Stocks for the Short Run

"Time is the enemy of the poor business and the friend of the great business."
-- Warren Buffett

The great wisdom in those words recently inspired me to look at companies 100 years old.That long-term approach also makes Buffett willing to pay more than you'd initially guess for truly great businesses.

Ideally, you'd want to buy a great company at a great price. But at cheap enough prices, businesses that may not be so strong in 50 (or 20, or even 10) years can make us money today.

So today, I'm going to look at three companies -- two famous, one not-so-famous -- that the market is severely discounting because of very real threats. For each, I'll give you my take on its chances of being a short-term winner.

Stock No. 1: The company Amazon.com will killEveryone "knows" the retail economy is moving toward the Internet. While your local mall struggles to keep occupancy up, Forrester Research projects that U.S. Internet retail sales will grow from $176 billion in 2010 to $279 billion in 2015.

Like me, you might see a sometimes dismaying amount of your money flowing into Amazon.com's (Nasdaq: AMZN  ) coffers. Between this anecdotal evidence and the broader shift from bricks-and-mortar to online shopping, it's easy to deduce that specialty retailers such as Best Buy (NYSE: BBY  ) , which mainly sell other companies' brands, are in for serious trouble.

But you ought to be careful with that assumption. Death can come slower than you'd think. Best Buy's still eking out top-line growth and returning 19.2% on equity.

When you've carved out a niche in big-box electronics retail, vanquished your closest competitor (Circuit City), and your stock still sells for a tiny forward P/E ratio of 8.6, I think you have enough life left to help investors profit in the short run.

Stock No. 2: The company with the 7.5 P/E ratioGlancing at Yahoo! Finance, you'll see that Tellabs (Nasdaq: TLAB  ) has a P/E ratio of 20.8. But once you back out the $1.1 billion net cash hoard from this $1.7 billion company, its P/E sinks to 7.5. If you look at free cash flow instead of earnings, it's a similar picture.

Is the market crazy? What's the catch?

It seems that Tellabs, which provides networking solutions to telecoms, is going through a metamorphosis. In its last quarter, it actually reported a loss because it's plowing money into its research and development -- almost 25% of sales!

Per its CEO, "We are positioning Tellabs for long-term growth with the mobile Internet over the next decade, rather than sacrificing the potential for the sake of short-term profits." That sounds great in theory. In practice, we have to worry whether this company is a money pit.

Tellabs is growing its business internationally, but it's struggling to maintain share in the higher-margin domestic market. As Zacks Equity Research puts it.

Our major concern for Tellabs is the increasing competition in its core wireless backhaul solutions segment. We believe Tellabs will not be able to maintain its current business rate with its most important customer AT&T (NYSE: T  ) . Historically, AT&T generated 20%-21% of Tellabs' total revenue and accounted for nearly 40% of the company's sales of the broadband-data networking products.

But man, those miniscule price multiples are enticing. And I like that Tellabs is giving at least some of its cash hoard to investors via a 1.6% dividend yield If management is correct in its vision, this could indeed be a short-run winner, big time. However, servicing the large telecom players (who have a lot of negotiating leverage) is a tough business -- especially when you're reinventing yourself. I'll be keeping tabs on Tellabs on my watchlist for now.   

Stock No. 3: No one roots for GoliathThere are certainly many things to worry about in the complex behemoth that is Microsoft(Nasdaq: MSFT  ) :

• The cloud threatens Microsoft's cash-cow Office offerings.
• Sales for the other cash cow, Windows, dropped 4% last quarter.
• Google (Nasdaq: GOOG  ) already dominates Microsoft's Bing in search.
• The video game business is nice, but just a small part of the pie.
• Microsoft's big hope against Apple and Google for smartphone success lies in partnering with fading giant Nokia (NYSE: NOK  ) .

Despite all that, Microsoft is an absolute cash machine. Backing out its $35 billion in net cash, it trades for just 7.5 times its trailing free cash flow-- a price worthy of a dying business.

But here's the punchline. Microsoft is still growing. Its sales grew 15% over the last 12 months, and averaged 10% annual growth over the last five years.

My takeaway: Microsoft's big-time growth days are over. And it faces real threats. That said, Microsoft stock is certainly priced for gains in the short run.