That's how Steve Neimeth has been viewing some recent additions to his SunAmerica Value Fund (SSVAX) . He's focused on larger-cap stocks that show above-average earnings growth and trade at a below-average multiple to the market. If a company is restructuring its business or engineering a financial turnaround, so much the better.
"It's an interesting time for large-cap investors," Neimeth said. "Lines have blurred between growth stocks and value stocks. We're finding more opportunities to invest in broken growth companies that still have superior growth prospects but are trading at market multiples."
One company contributing to performance lately is Yahoo Inc. (YHOO) Shares of the Internet portal giant have gained about 14% so far this year after losing 35% in 2006. The buying interest, Neimeth says, is largely due to Yahoo's improved ability to target and analyze users in ways that appeal to Web advertisers and marketers. The advertising system upgrade, dubbed "Project Panama," makes Yahoo more competitive with Google Inc. (GOOG) , the fund manager notes, and with Yahoo's shares selling at a meaningful discount to its larger rival, an attractive holding for the portfolio.
Another portfolio holding, Valero Energy Corp. (VLO) , has been caught up in the volatility surrounding oil. Valero is a leading U.S. refiner, and Neimeth says the stock's price doesn't fully reflect the company's dominance in an industry with high barriers to entry and strong profit margins -- even if oil prices trend down.
Share-price weakness attracted Neimeth to Constellation Brands Inc. (STZ) , a major distributor of liquor and wine. "Investors are skeptical they can grow their brands, which are slow-growth," Neimeth said. "They're concerned about the wine business, and a potential glut of grapes that may come to market and cause lower pricing and profitability."
