In 2008, the bear savaged investor wealth. The Dow Jones Wilshire 5000 Composite Index, the broadest measure of U.S. stock market performance, lost nearly $7 trillion in market value. The average stock investor lost approximately 38%. That's a difficult pill to swallow, but it's also the sort of jarring experience that should prompt the thoughtful investor to ask: in this new, "bear" reality, what works and what doesn't and, most importantly, how can I protect my assets against further losses?

Here's a hypothetical strategy
In order to answer that question, let me describe the lessons learned (or, rather, confirmed) from scrutinizing the 2008 performance of a screen-based investing strategy. The strategy rests on two legs:

It's a very basic implementation of two simple investment tenets: You want to own cheap stocks, and you want to sell (or sell short) expensive ones. In this case, I'm using the P/E as the basis for determining which stocks are "cheap" and which are "expensive."

The screen produced 24 buy recommendations and 23 short recommendations. Here's how the strategy would have performed in 2008 (assuming equal dollar amounts invested in each position):

Long positions (selection)

Stock

P/E* at 12/30/2007

2008 Total Return (incl. dividends)

E*Trade Financial (Nasdaq: ETFC)

3.4

(67.6%)

Capital One (NYSE: COF)

6.8

(30.4%)

American Capital (Nasdaq: ACAS)

4.4

(89.1%)

*Price-to-trailing-12-months' earnings before extraordinary items. Source: Capital IQ, a division of Standard & Poor's.

Short positions (selection)

Stock

P/E* at 12/30/2007

2008 Total Return (incl. dividends)

Sprint Nextel (NYSE: S)

285.6

+86.1%

Intuitive Surgical (Nasdaq: ISRG)

105.6

+60.7%

Wynn Resorts (Nasdaq: WYNN)

63.8

+62.3%

SanDisk (Nasdaq: SNDK)

100.2 Continued...