5 More Turnaround Stocks

Let's start again with this "classic" photograph. Yes, I linked to it last week, but since only 9,049 people read last week's piece, I figured it was worth repeating.

See, the world is full of investing lessons. The point of this one? People are lazy. If you're willing to do your research, you can make money in the stock market.

That's particularly true when it comes to stocks that have dropped significantly over a short period of time -- as General Motors (NYSE:GM) and Ford (NYSE:F) have since the beginning of November. Many investors call these "falling knives," because they're dangerous. A stock usually drops because something is wrong. In the cases of GM and Ford, the companies face a difficult operating environment, lots of obligations, and no clear path back to profitability. That's a scary combination.

Nevertheless, fortunes are made by the investors who succeed in buying great stocks while they're down. Seriously. And they're able to do so because they're willing take a hard look at every falling knife, weed out the junk, and bet big on the stocks they're sure will turn around.

In other words, they're decidedly not lazy.

Meet the masters
The names behind this strategy include Buffett, Munger, Weitz, Olstein, and many more. It's also the strategy the Fool's own Philip Durell preaches 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 Motley Fool CAPS, a brand-new 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 10% 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 Robert Olstein and Richard Aster were both recently buying shares of Carters. While that's something to like about that stock, it should be said (and so I'm saying it) that these are not recommendations. Instead, they're ideas that CAPS has generated, which 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 (without being lazy or letting emotion affect your decision-making). If you'd like to get started doing just that, come and 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 Hansondoes not own shares of any company mentioned. The Fool's disclosure policy assures you that no stocks were harmed in the penning of this article.