Every company has a tempting story to tell when times are good — it's easy to believe that the news will stay favorable and the company's stock will continue rising. The higher the stock price, however, the more dependent it is on a continuing supply of upbeat news. If that supply should turn from positive to negative, as it will for every company at one time or another, the stock price will head south — and, with fear being a stronger emotion than greed, when a stock falls out of favor its price can decline with a ferocity that would have seemed unimaginable only days or weeks earlier.

It's then, when a stock you own gets hammered, that you can appreciate the true value of an exceptional company. As Mark Twain wrote in a short story, "a virtue which has not been tested in the fire is no virtue at all". When your capital gains turn quickly into capital losses, when the self-styled experts take to the airwaves and newspapers to tell you why you should sell and "cut your losses", when you can't predict how (or if) the current crisis will end, you will have one question to answer: can I give this company the benefit of the doubt?

For most companies, the answer is no. They might recover from whatever crises they're facing — with their stocks rebounding as well — but you can't say with relative certainty that they will. And if you're wrong, you can compound losses upon losses as you buy more stock all the way down. On the other hand, you might be cautious, unwilling to add to your position as the price declines, only to leave behind a boatload of potential profits when the company surprises you by recovering and even prospering.

"Buy low, sell high" is a wonderful concept, one which never fails in hindsight. It's when you have to look forward that things get tricky. To get past that hurdle known as reality there is, however, a relatively easy solution: focus on companies with sustainable competitive advantages supported by strong cash flows... companies which deserve the benefit of the doubt. Here are three current examples:

Sixteen years ago, I had the opportunity to interview several of the best investors in the world for a chapter in my first book. In one of these interviews, the late great strategist Michael Aronstein made a classic point. "Very few people can actually earn money simply by utilizing their own judgment," he said. "And what we're talking about in investing is earning monetary rewards from the use of judgment as opposed to hard physical labor." Successful investing can't be easy — otherwise we'd all be doing little else. Investing means competing against everyone else and against your own instincts, in particular the instincts to follow the crowd and to hope for quick profits.

It isn't pleasant leaning against the consensus, especially year after year, but you don't need to fight a battle in the dark. When there's discipline in finding companies worth the benefit of the doubt and in buying them when they're under fire, you've found yourself a formula for long-term success.