To say we are in a market of historical dislocations is to state the obvious these days. Scandals, bailouts, failures and survivals top the headlines every day.

However, if you look past the headlines to uncover the many companies not making the front covers, you can find some intriguing valuations and interesting stories. Some stocks are overpriced with too-high expectations; others are written off as finished before their time.

Reading the daily headlines of the Israeli-Hamas conflict, you would likely never have considered a company called Elbit Systems (ESLT), an Israeli defense contractor that will likely benefit in the coming months and years as tensions in the region escalate. Based in Haifa, Israel, Elbit's lines of business include upgrading aircraft and helicopter systems and building and maintaining unmanned aircraft vehicles, as well as naval systems and general homeland security systems. Elbit just won a $100 million military communications contract for customers in Europe, South America and Asia to be delivered by the end of 2009, and it will likely win more contracts in the future.

Elbit trades with a forward P/E of 12.5, which is slightly above the industry average of 9.7, and with EV/EBITDA of 5.9, which is slightly elevated given the $400 million in debt Elbit currently has. Quarterly revenue growth year over year is 29.3%, which is double the industry average of 14.3% and four times higher than General Dynamics (GD) and Northrop Grumman (NOC). Gross margin firm wide is 28.5% vs. the industry average of 27.7%.

Iteris (ITI) is also a play here as the leading developer of traffic management technologies, particularly in video image processing. Iteris also provides outdoor machine vision systems and sensors in the U.S. and abroad. It makes vehicle detection systems for traffic and intersection control and data collection applications. With Iteris’s technology, you can see exactly who is entering and leaving major cities and tourist sites. Iteris is a small-cap company, with great quarterly growth of 12.3% vs. competitor Quixote’s (QUIX) 2.6% and the industry average of 11.5%.

Last week, Satyam Computer Services (SAY), one of the largest companies in India, claimed that it cooked the books by over $1 billion, which sent the broader India stock market down almost 7% as many dubbed this scandal “the Enron of India."

Wipro (WIT), one of Satyam’s competitors, fell particularly hard on the Satyam news. But Wipro, the leading outsourcing services company in India, should benefit substantially from Satyam’s demise. Ask yourself this question: If you are a large reputable company, who would you rather your business be associated with, Satyam, India’s largest fraud, or Wipro?

Wipro trades with a forward P/E of 13.2 and EV/EBITDA of 12.3 and boasts quarterly earnings growth of 35.6%. Gross margins for Wipro are 29.7%, well below the industry average of 58.1%, but operating margins are 16.6% vs. the industry average of 1.4%.

Posted on Jan. 12, 2009