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Five flat stocks ready to rebound
Posted by: gurufocus (IP Logged)
Date: October 6, 2006 02:55PM

The stock market has returned to territory not seen in six years. In late September the Dow Jones industrial average came within a few points of the record-high 11,723 set on Jan. 14, 2000. That was reason to celebrate for many investors, especially those fortunate enough to own such Dow (Charts) standouts as Merck and AT&T, both of which have returned more than 30 percent this year. And with interest rates and oil prices easing, there are reasons to believe the good times will continue.

But rather than hopping on a hot stock and hoping for the best, it may be smarter to seek out unappreciated value; Merck and AT&T, after all, were in the doldrums a year ago. "Investing is like hunting," says Bob Costomiris, portfolio manager of the Wells Fargo Advantage Mid Cap Disciplined fund. "The best time to hunt is when and where others aren't."

Sprint Nextel and Del Monte: two stocks that are unloved and underappreciated.

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Serwer: Wal-Mart, Goodyear ready for rebound

Five flat stocks ready to rebound

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That's why we set out to find companies with healthy prospects that most investors have shunned lately. We talked to fund managers about companies in unpopular industries that have been beaten down and scorned by analysts. We found five promising choices ranging in size from megacap to small cap. They all match low expectations (and low price/earnings ratios) with strong balance sheets and meaningful growth on the horizon. With a little patience, investors could reap strong returns from our five out-of-favor picks. Here they are, starting with the largest.

Home Depot (Charts)

Shareholders of the home-improvement giant haven't had much to celebrate this year: The stock price has fallen 10 percent since January. Same-store sales fell slightly in the second quarter as real estate cooled, and some investors have worried that a housing bust could make things worse. Others wonder whether the world's third-largest retailer, which has opened more than 2,000 stores in the U.S., Mexico and Canada, may be suffering from the Wal-Mart syndrome - running out of room to grow. And the flap over CEO Bob Nardelli's lavish pay package hasn't helped.

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Stocks Discussed: HD, S, BWA, DLM, RDA,
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