"If you are looking for maximum rebound potential, you have to go lower on the quality spectrum; it is typically lower quality, lower priced stocks that will have the largest gains when markets rebound," says George Putnam.
In his industry-leading The Turnround Letter, he looks at a package of 10 stocks recently trading below $5 per share while also offering "bundles of cash." Here's his review.
"Of course, you don’t want to dip down \too far in terms of quality because in these tough economic times many weak companies will not survive.
"As a compromise, we looked for stocks that have been beaten down below $5 in price but where the companies still had substantial amounts of cash on their balance sheets, and came up with the stocks below:
"Alcatel Lucent (NYSE: ALU) was formed in 2006 by the merger of the two leading makers of telecom equipment. As you might expect when you merge a U.S. company with a French company during a period of industry turmoil, things didn’t go as well as planned.
"But now the company has a whole new top management team, and you can purchase the combined company for less than one half of what Alcatel paid for Lucent two years ago. The company currently holds $2.78 per share in cash.
"Cypress Semiconductor (NYSE: CY) has long been an innovator in the semiconductor industry. Management is now focusing on becoming a major player in programmable chips used in a variety of products ranging from MP3 players to running shoes.
"T.J. Rodgers, Cypress’ CEO since inception in 1992, has been a buyer of the stock in recent months, and he has had a pretty good record of knowing when to buy his own stock.
