5 More Turnaround Stocks

The column is back again this week with some more value-focused stock ideas. And, yes, they're out there even as the Dow flirts with 12,000. Remember the old investing adage: Buy low, sell high. Now is certainly not the time to be thinking about investing in the Dow or in stocks like American Express (NYSE:AXP) and DirectTV (NYSE:DTV), which are setting 52-week highs.

Is that contrary? Maybe. But it's certainly profitable. To invest successfully, it's absolutely crucial to separate your emotions from your financial decision-making. Indeed, fortunes are made by the investors who succeed in buying great stocks while they're down.

Meet the masters
The names behind this strategy include Buffett, Munger, Weitz, Olstein, and many more. It's also the strategy preached by the Fool's own Philip Durell at Motley Fool Inside Value. But you don't need to be a master investor or an Inside Value subscriber to be a value investor. All you need is patience, a willingness to be contrary, and some good ideas.

We probably can't help you with your patience or your contrarian spirit, but here are five ideas from brand-new Motley Fool CAPS, a community-intelligence database that asks investors to rate stocks. In turn, every investor is ranked, as is every stock. So as more people participate and more time passes, we hope to be able to determine the best investor and the best stock in America and potentially the world (though admittedly we'll have to roll this thing out of beta testing before we can start talking about global domination).

And now for the stocks ...
These are stocks that, despite being down more than 20% over the past year, have received a five-star rating from our pool of individual and professional investors.

So without further ado:

It should be noted that Seth Klarman owns some Acusphere, George Soros recently bought Encysive, and John Keeley has been buying WP Stuart. While those are certainly endorsements of those three companies, it should be said (and so I'm saying it) that these are not recommendations. Rather, they're ideas that CAPS has generated and that I'm offering up in the name of further research.

After all, when you go digging for dirt-cheap stocks, it's absolutely crucial to do your due diligence. If you'd like to get started doing just that, come see what our CAPS investors are actually saying about these companies. To do so, just click here to join the free beta test of CAPS today.

Tim Hanson does not own shares of any company mentioned. Encysive Pharmaceuticals is a Rule Breakers pick. The Fool's disclosure policy assures you that no stocks were harmed in the penning of this article.