"If you are looking for maximum rebound potential, you have to go lower down on the quality spectrum; it is typically the lower quality and lower priced stocks that will have the largest gains when the market rebounds," says turnaround expert George Putnam.
In his industry-leading service focused on distressed companies, 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. Cypress currently has $1.65 per share in cash.
"But the company has the global scale to be a big winner when manufacturing begins to rebound. The company has $2.10 per share in cash.
"The company is building a deepwater capability to augment its strong presence in shallow-water operations. This should boost the company's prospects when oil prices recover. The company has $3.63 per share in cash.
"Lawson Software (NASDAQ: LWSN) provides enterprise resource planning software aimed at mid-sized organizations. This segment of the market is being hit particularly hard during the global slowdown, but the company has the cash to be a survivor.
"Also, it could be an attractive acquisition target when mergers begin to pick up again. Lawson has $1.84 per share in cash.
"Motorola (NYSE: MOT) has a long and notable corporate history that has been tarnished in recent years, following a string of shortfalls in the cell phone sector and a revolving door in the CEO suite.
"However, the company has several very strong businesses that have been overshadowed by the cell phone problems. The valuation of the various pieces appears very cheap. Motorola currently has $3.15 per share in cash.
"The company is responding by closing stores and distribution centers. The closings will lead to write-offs, but the company should be able to weather the current poor economic climate. The company currently has $1.43 per share.
"Orbotech (NASDAQ: ORBK) makes high-speed optical inspection systems that are used to identify defects in the manufacturing of printed circuit boards and other electronic components. With heavy exposure to Asia, the company has suffered as manufacturers in that region cut back.
"Orbotech is implementing a number of cost cutting strategies to help it through the global downturn. Whatever you think of the company's prospects, it is intriguing because its cash per share, after subtracting all debt -- currently $9.62 -- exceeds the stock price.
"Sun Microsystems (NASDAQ: JAVA) has been in the doldrums ever since the Internet bubble burst at the beginning of this decade. Just as it was finding a new market niche in providing computers to the financial services industry, that sector cratered.
"But it is not wise to count Sun out yet. It continues to have a strong research department, and its balance sheet should support the company for quite a while to come. Meanwhile, the company has $3.56 per share in cash.
"However, the company still has strong products, as shown by its winning a major new contract from British Telecom. And its strong balance sheet gives Tellabs plenty of staying power. The company has $3.56 per share in cash."
Steven Halpern's TheStockAdvisors.com offers a daily look at the latest market commentary and favorite stock picks and investment ideas from the nation's leading financial newsletter advisors.