Most of the time, rifling through garbage for treasure results in nothing but dirty, smelly hands. But once in a while, there's something really valuable littered among the banana peels and used toothbrushes. Earlier this year, a group of Colorado choir students were separating recyclables in several thousand pounds of trash and uncovered two posters signed by Wyland, a famous painter of marine settings; each was estimated to be worth several hundred dollars. A month later, police in Fort Smith, Ark., found $166,600 inside a trash can behind a Red Lobster. On Wall Street, too, there's a group of pros who have had some luck picking through the stocks others have thrown away. And what's more, these so-called value investors are confident that they'll find plenty of hidden gems in the present down-in-the-dumps market. "When we see fear and uncertainty and panic selling, we get very excited," says Larry Pitkowsky, comanager of the $73 million GoodHaven fund.

These days, value investors have plenty of stocks to choose from. From May through September, the market fell 17 percent, in one of the fastest and steepest summer free falls since World War II, according to Standard & Poor's. Stocks have suffered not only from investors' worries that corporate profits might slow but also from their aversion to owning equities in general -- or anything else not backed by the full faith and credit of the U.S. government. Such four-alarm fear rings like a sweet lullaby to people like Connor Browne, comanager of the $3.5 billion Thornburg Value fund. Browne, for one, says the plunge has created deals on certain stocks, on par with those last seen during the financial crisis.

He and many other value managers have used the pullback to buy names from their wish lists. Wally Weitz, comanager of the $858 million Weitz Value fund, spent $61 million during a single-day buying spree on Aug. 8. One of his picks: Wells Fargo (WFC), a "perfectly safe" company, he says, that nonetheless has fallen under the cloud that's dogging all financial stocks in the weak economy. The stock fell more than 20 percent during the six months that ended this September. Weitz tunes out the market's day-to-day swings and instead estimates how a company will look 20 years from now. (In Wells Fargo's case, he says, that's pretty good.) Thornburg's Browne bought Community Health Systems (CYH), a Tennessee hospital firm whose stock had fallen nearly 40 percent. "It's exactly the kind of company that the market has gotten nervous about in this environment," he says.

The value investors haven't just focused on the most downtrodden names, either -- some also bought the stock of firms whose valuations aren't, on an absolute basis, supercheap but whose prices have become compelling for the first time in a while. Weitz bought Disney, "a great company that's rarely at our price." Likewise, Sarah Ketterer, manager of the $1.4 billion Causeway International Value fund, had been following Singapore-based shipbuilder Sembcorp Marine -- and finally pounced this fall after the firm's stock dropped more than 30 percent. She also scooped up some suddenly inexpensive European names, including Zurich Financial Services and SAP (SAP) .

Of course, all the problems in Europe, along with the shaky economy here, could throw another layer of trash on top of the stocks the value investors are now buying. "This volatility is exhausting, and I do this for a living," says Don Wordell, manager of the $1.8 billion RidgeWorth Mid-Cap Value Equity fund. And sometimes these beaten-down stocks turn out not to be hidden gems at all. They become what Wall Street pros call a value trap, and their stocks never recover. But the value managers are willing to bet that their recent Dumpster diving will pay off over the long run. Despite the risks, the value managers believe the odds of picking up a valuable stock in this bad market are a lot better than trolling for valuables at the local landfill.