Focusing on "turnaround" stocks was a favorite angle for investors in the 1990s. Many companies had been run poorly, but new management could easily unlock value by focusing on a deep restructuring. The key was to find businesses that still possessed sizable market share, brought in new leadership and most importantly, were already cheap based on current cash flow, let alone what future cash flow growth might entail.
This is the recipe in place for Hewlett-Packard (NYSE: HPQ) today, which only a few decades ago was considered to be one of the premier technology firms in Silicon Valley. New CEO Meg Whitman has her work cut out for her, but she inherits a business that is already a cash-producing machine (free cash flow has averaged $8.5 billion during the past three years). And trading at just six times projected 2012 profits, it's clear investors aren't holding her to a very high set of expectations. Look for Whitman to lay out plans to revitalize the company in coming months. Far-sighted investors need to pay attention.