Benjamin Graham profited from opportunity.

Sure, the father of value investing gave us the analogy of Mr. Market and the concept of "margin of safety." But his real claim to fame was making lots of money from special stock opportunities called "net-nets" -- stocks trading for less than two-thirds of their net current asset value. When we get right down to it, that's what special-situations investing is: finding mispriced opportunities with special circumstances.

It's nice to find great companies at good prices, but we shouldn't neglect other, potentially lucrative types of investments. Warren Buffett sought special situations, such as American Express (NYSE:AXP) after its salad-oil scandal, in his original partnership. Walter Schloss, another Ben Graham disciple, outperformed the market for years by finding mispriced stocks. Joel Greenblatt even wrote a book, You Can Be a Stock Market Genius, that highlighted special situations.

Special situations investing methods
The net-net deep-value opportunity is not the only type of special situation. In turnaround situations, a company with problems fixes them and gets back on track. Peter Lynch loaded up Fidelity Magellan on Chrysler when the automaker had to overhaul itself.

There are also spinoffs, a favorite of David Einhorn of Greenlight Capital. He's got two big ones in his portfolio: Ameriprise (NYSE:AMP), from American Express, and Genworth (NYSE:GNW), from General Electric (NYSE:GE). Both are handily outperforming the market since they left their respective nests.

And sometimes an investment's value is hidden from view, leading the market to misprice it. Our own Bill Mann found Fairmont Hotels before it went private, while it was trading for less than the value of its premium hotels.

Fools, beware: These situations are not for novice investors. (Do you know what net current asset value is?) To help you learn more about them, and to expose you to other special situations, we've compiled a great batch of articles. Some come with warning labels, some have complex economics, and some require digging deep to find value. Along with the examples, we discuss the mind-set required to put such investments to work. Click the links below to start learning how special situations can be opportunities knocking at your door.

A smorgasbord of starters:

Explore different kinds of turnarounds:

Meet other special situations that occasionally appear:

This article originally ran on March 7, 2007, and has been updated.

If you're looking for great companies at good prices, discover our Foolish Inside Value selections with a free, 30-day trial.

Mike Kasprzyk updated this article, which was originally written by David Meier. Mike does not own shares in any of the other companies mentioned. The Fool takes its disclosure policy very seriously.