Out-Of-Favor Stocks

Nothing can be more slippery in investing than trying to buy that which is hated. At the same time, finding value in unloved places can lead to an exceptional investment. For the record, Mr. Market usually gets it right: an out-of-favor stock usually deserves to be there. Nevertheless, it's worth the time to explore such opportunities, since it takes little time to decide whether to abandon the idea or really start digging in.

IN PICTURES: 20 Tools For Building Up Your Portfolio

Building Blocks

Granite Construction (NYSE: GVA) is an infrastructure construction company that will likely rebound once the cycle improves. The fact that its primary focus is building roads, highways and bridges instead of residential and commercial plots is a big plus. The company has a quality balance sheet with no net debt. Shares yield 2.3% and trade at a slight premium to book value. As infrastructure demand picks up, so should Granite's business. It will fare well, along with smaller infrastructure company Sterling Construction (Nasdaq: STRL), which also specializes in infrastructure work. With quality balance sheets, both have the financial wherewithal to withstand the tough environment.

Basic Business

Chart Industries (Nasdaq: GTLS) manufactures and supplies engineered equipment used in the production, storage and end-use of hydrocarbon and industrial gases in the U.S. and abroad. The company's products include things like aluminum storage tanks, vacuum pipes and ambulatory oxygen systems. The company was recently included in a U.S. Dept of Energy Project Award, a tiny award of $1.4 million but an important achievement. Chart is profitable with net margins of 6%, and just over $40 million in debt sits on the balance sheet.

Martin Marietta Materials (NYSE: MLM) is one of the leading aggregate materials producers in the U.S. Martin and rival Vulcan Materials (NYSE: VMC) effectively have mini monopolies in the areas they serve. Transporting heavy materials like cement and stone is very expensive, so they don't travel far. Businesses like Martin and Vulcan benefit with their extensive network. As infrastructure work begins to show signs of life, Martin and Vulcan will be the first to benefit.

Patience And Due Diligence

No matter the investment idea or how compelling it may seem, patience is often necessary for out-of-favor stocks. Yet patience can only be attained when one has a firm understanding of the business and will not likely be flustered at the first sign of trouble. (For more, see How To Avoid Common Investing Problems.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!