Sometimes, investing seems like it couldn't be simpler. As hackneyed as advice to buy low and sell high may be, sometimes that's all it takes to put you in position to grab some great opportunities on the cheap.

At its core, value investing is all about the disparities between the true value of a company's stock and the price the market is currently slapping on it. As easy as it is to get swept up in the concerns of the moment, substantial changes in intrinsic value don't happen nearly that often. So if you want to capitalize on the irrationality of the market, sometimes all you have to do is look to what the market despises and get in while the getting's good.

2010 losers and the Great Rotation
Throughout the stock market rally since March 2009, during which the S&P 500 has come close to doubling, some have complained that the best performers were actually the worst-quality stocks. Early on in the rally, debt-ridden companies in beaten-down industries were among the biggest gainers, putting in multibagger performance as it became evident that stocks wouldn't go out of business and might actually survive the recession.

Last year, much of the rest of the stock market started to catch up to some of the rally's biggest winners. But some laggards still posted big losses for 2010, despite a reasonably strong year that sent the broader market up double-digit percentages.

Yet so far this year, those losing stocks from 2010 are among the big winners. In a move that some analysts are calling the Great Rotation, an index of last year's worst-performing stocks has posted a January gain of more than 5%, while 2010's top performers dropped 2.6% on average. The move has brought legendary investor Bill Miller and his Legg Mason Value Trust back into the spotlight, as the phenomenon has pushed the fund from the bottom of the pack to the top.

Reversal of fortune
To see exactly what sort of stocks we're talking about, I looked at S&P stocks that lost at least 10% last year and have gained at least 10% so far this year. Here are the eight large-cap stocks that have participated in the Great Rotation:

Stock

2010 Return

2011 Return (YTD)

Hewlett-Packard (NYSE: HPQ) (17.7%) 12.7%
MasterCard (NYSE: MA) (12.2%) 10.4%
NVIDIA (Nasdaq: NVDA) (17.6%) 66.7%
Intuitive Surgical (Nasdaq: ISRG) (15.1%) 28.5%
Micron Technology (Nasdaq: MU) (24.1%) 37.8%
Sears Holdings (Nasdaq: SHLD) (11.6%) 13.4%
L-3 Communications (NYSE: LLL) (17.3%) 11.5%
Computer Sciences (12.9%) 12.4%

Source: Capital IQ, a division of Standard and Poor's.
Returns through Feb. 4. YTD = year to date.

Of course, for some of these companies, great news is responsible for rising share prices. For NVIDIA, prominent placement in many tablets featured at the Consumer Electronics Show created buzz for a turnaround in the stock. To some extent, Micron is tagging along on that trend in hopes that the memory it makes will still be relevant in a mobile world. A favorable earnings report helped Intuitive Surgical come back after the slow hospital spending that marked the recession.

But you shouldn't get the idea that everything's free and clear for these companies. MasterCard settled a potential antitrust probe with the Justice Department, but the prospects for fee limits on debit and credit cards along with competition from new smartphone-based payment systems have damped investor enthusiasm. L-3 faces the perennial specter of defense budget cuts, and HP is still struggling to demonstrate that its new CEO has what it takes to get the company back on track.

Nevertheless, what the recent moves for these stocks show is that sentiment got too low. Even for stocks facing serious trouble, there's always a price at which the potential rewards outweigh the risks. The challenge is knowing what that price is -- and then jumping on the opportunity.

Take a closer look
The key lesson investors have to remember is that not every stock deserves the price drops the market hands it. If you can identify stocks that have underlying strength, you'll put yourself in position to profit handsomely when the broader market realizes its mistake.

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For Fool contributor Dan Caplinger, it's finishing that's the hard part. He doesn't own shares of the companies mentioned in this article. Intuitive Surgical is a Motley Fool Rule Breakers recommendation. NVIDIA is a Motley Fool Stock Advisor choice. The Fool owns shares of L-3 Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy sang along with "Let's Get It Started" during the Super Bowl.