Many successful individual investors have at some point in time had the enjoyable experience of picking a stock for their portfolio that turned out to be an absolute home run.

For some, it is a small-cap pharmaceutical company that manages to strike gold with a new drug, while for others it may be a boring old retail company that was snapped up at a cheap price and ridden for years of outstanding gains. Whatever shape or form a home run stock pick happens to come in, the end result is almost always the same - a single pick transforms a losing portfolio into a winner.

Buy Like Buffett
Even the success of legendary investor Warren Buffett and his holding company, Berkshire Hathaway (NYSE:BRK.A, BRK.B), has been primarily derived from a handful of outstanding stock picks. Buffett's decisions decades ago to buy massive numbers of American Express (NYSE:AXP) shares in the wake of the salad oil scandal that had depressed the stock's price, and his long-term investments in outstanding companies such as Coca-Cola (NYSE:KO) have been the driving force that powered Berkshire Hathaway to market-beating returns for many years.

What is most interesting about those types of home run stock picks is that anyone could have easily made the same decisions and invested heavily into those stocks as well. All that was required to capitalize on those opportunities was a keen eye and a willingness to bank on companies that the rest of the market was selling off.

With that in mind, here are five established companies that have been sold off by the market recently to near 52-week lows, but are also expected to produce positive earnings per share (EPS) in the current fiscal year and trade with relatively cheap forward P/E ratios.

Company Full-Year
Expected EPS
Forward P/E
Barclays PLC
(NYSE:BCS)
$3.88 5.6
Forest Laboratories
(NYSE:FRX)
$3.20 8.9
Frontier Oil
(NYSE:FTO)
$2.71 7.2
Goodyear
(NYSE:GT)
$2.77 5.8
Hertz
(NYSE:HTZ)
$1.41 6.5
Data as of market close June 20, 2008.


Good Years to Come for Goodyear?

Of these five stocks, Goodyear Tire & Rubber is definitely one that is worth serious follow-up research. Goodyear enjoys an almost iconic brand name, and this is a competitive advantage that helped its stock price climb steadily from $4 per share in early 2003 to over $30 per share by the summer of 2007.

The stock has since pulled back to the $20 level, almost right at its 52-week low. Despite the recent sell-off in the stock, consensus estimates still peg the company's 2008 EPS to come in at $2.76, and at $3.46 for fiscal 2009.

With such sizable bottom-line growth expected from this well established company, its forward P/E ratio of less than 6 makes it attractive. If Goodyear continues to expand its earnings at such a healthy pace each year, eventually either the stock price or its forward P/E valuation must increase to reflect the true value of the company. Investors who are willing to buy now at a depressed share price may look back in a few years at a true home run stock pick.

To learn more, check out our Stock Picking Strategies Tutorial.

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