(FORTUNE Magazine) – What an agonizing time. Stocks have been scoring big gains, yet the valuations on the market are flashing warning signals. So what's an investor to do? To find out, Fortune turned to five of the country's best bargain hunters. These ''value investors'' look beyond market hype and search for solid companies that are deeply undervalued relative to earnings or assets. Here are their best gems.

MICHAEL PRICE MUTUAL SHARES FUND Price is president of the Mutual Shares fund, which since 1976 has returned 1,068% to investors, vs. 648% for the S&P 500. The market will not go up forever. At some point we are going to feel some pain. I am not going to overpay for securities no matter what anyone else does. In a few select areas, however, we do see some value. We are buying a couple of oil stocks right now, Amerada Hess and Phillips Petroleum. As the price of oil has dropped, they have been battered. Hess is down from $57 a share to $46, Phillips from $28 to $24, but oil won't stay at $18 a barrel forever. Hess sells for three times cash flow, a very low multiple. It still has plenty of North Sea reserves and refining capacity. Phillips sells for between three and four times cash flow and has a sizable supply of natural gas. Another stock we like is ITT. It's in all the wrong groups -- insurance, hotels, auto parts, defense electronics, and forest products. Not one is expected to grow fast. Yet we see value in ITT since, at $58 per share, it sells for two-thirds of book value, vs. 2.6 times book for the S&P 500. ITT also owns 30% of Alcatel, the French telecommunications subsidiary of Alcatel Alsthom. That investment alone is worth $30 a share, so you get the rest of the company for around $28 a share. Bank stocks have doubled, but we still like Chemical Banking and First Chicago. They continue to be cheap relative to what they should earn next year.

GREENBERG & SHAPIRO CHIEFTAIN CAPITAL The average account managed by Chieftain's two chiefs, Glenn Greenberg and John Shapiro, grew 48% last year, over 17 percentage points more than the market.

Greenberg: We have not been buying consumer product stocks, which we think are very expensive. We try to find companies with hidden values or misperceived valuations. We own stocks in real estate, financial services, and energy. All three are out of favor, which is why we find values there now. We are looking for a big turnaround in residential home construction over the next couple of years. Homebuilding now is at a 45-year low. The small guys have been squeezed out of the business. We own UDC-Universal Development, which builds homes in Arizona, California, and the Southeast. It builds around 2,400 homes a year, so it's a big player. The company is also changing from a master limited partnership to a corporation, which should increase institutional ownership. It sells for $10 and will earn a buck this year. We are looking for $2 per share in 1993 and $3 in 1994. This company is gaining market share, so even if the economy grows slowly, it will still improve its position. We have already doubled our money in Boston Bancorp, but we still like the stock. It is a very cheap thrift selling for $27 a share, and it should earn $4.50 this year. Boston is buying in its own stock, has a clean balance sheet, and about 50% of its assets are in mortgage-backed securities. In 1986 this bank practically stopped making loans. With everything the way it is in New England, it is relatively unscathed.

Shapiro: In energy we like Burlington Resources, an exceptional natural gas company. We estimate that Burlington has 5.8 trillion cubic feet of proven reserves of gas and 15 trillion probable and possible reserves. Today natural gas sells for about $1.30 per 1,000 cubic feet, but the market is valuing Burlington's proven reserves at about 65 cents and valuing the probable and possible reserves at zero.

MARK BOYAR MARK BOYAR & CO. Boyar's undervalued-stock research is a hot commodity on Wall Street. His publication, Asset Analysis Focus, tips the pros to companies that can be bought for a song. Over the past few years investors have been buying stocks of companies with strong earnings growth. But those stocks are so high now that stocks with solid asset values must swing back into favor. There are a great many values masked behind the overall market's high prices. I like a group of mundane, domestic companies with no exports. These companies have undergone substantial reduction in employees and cut costs. The stocks have potential earnings growth and are selling at a big discount to apparent worth. Among these bargains are media companies, where we see tremendous inherent value. Today these companies are more efficient and will enjoy higher profit margins than ever before. We like Meredith, which publishes Ladies Home Journal and Better Homes and Gardens. It sells for $26 a share, and we think it's worth twice that. It has almost no long-term debt and has recently entered the cable business.

We also like Affiliated Publications, which publishes the Boston Globe. The question is, how do you play the inevitable pickup in the New England economy? The answer is, buy Affiliated. The stock sells for about $10, and we think it is worth more like $18. We also own New York Times. It is one of the few newspapers with increasing circulation during the recession. There are some attractive stocks in retailing. We love Petrie Stores. It owns 14% of Toys ''R'' Us, an investment that is worth over $1 billion. Yet the entire market cap of Petrie is only about $1 billion. That means when you buy the stock, you are paying nothing for the 1,700 Petrie stores.

SETH KLARMAN BAUPOST GROUP Since 1983, Klarman's clients have enjoyed an average annual return of more than 20%, vs. 16.5% for the S&P 500. Today, Baupost's president sees only one stock worth buying. We are sitting on cash and raising more. Our list of buy orders is near zero. Our intuition tells us that when everyone is fleeing cash, that is the place to be, even though it yields the least. We are not going to run helter- skelter into stocks, which today have no room for disappointments. The only stock I would recommend is ESCO Electronics, a defense electronics company spun off from Emerson Electric in 1990. We see tangible book value of $16 a share, and the stock sells for $7. The company had no earnings in 1991, but it should this year as it begins work on profitable contracts. It has $4 per share of cash and is reducing excess working capital, which should produce $6 a share of free cash flow over the next several years.