Ralph Whitworth, the head of Relational Investors, was interviewed on Bloomberg last night. Stocks Whitworth likes are Sprint Nextel Corporation (NYSE: S) and National Semiconductor Corporation (NYSE: NSM).

It appears Relational still owns Home Depot Inc (NYSE: HD) where a Relational partner has joined the board. Relational helped force the ousting of former Home Depot CEO Bob Nardelli in January.

What is Whitworth's formula? While he did not explicitly say, it appears he likes companies that generate a lot of cash with underleveraged balance sheets. The combination of which can be used to return cash to shareholders via dividends and share repurchases.

One stock Whitworth said he did not like is Motorola Inc (NYSE: MOT), saying the business is too competitive, citing RAZR phones which sold at one point for $300 now sell for as little as $30.

Whitworth also does not like the auto industry saying it is going the way of the U.S. television manufacturing industry.

A shareholder group that played a role in Robert Nardelli's resignation as CEO at Home Depot (NYSE:HD)has agreed to drop its proxy fight with the company. Under the deal, David H. Batchelder will join the board and the leadership development and audit committees. Batchelder and his firm Relational Investors own 1% of Home Depot's shares.

This move is the culmination of several months of strong progress on the investor relations front for the home improvement giant. Under Nardelli, the company was so unfriendly to shareholders that Jim Cramer, among others, began referring to it as Home Despot.

On January 25, I wrote that the company's new CEO, Frank Blake, had taken the unusual step of rejecting the board's initial compensation offer as too generous (this after Nardelli accepted a 210 million dollar severance package). Blake will earn a base salary at Home Depot this year of $975,000, and up to $5 million dollars in equity based on how the company performs. Blake's deal also does not guarantee any kind of severance package.

While there are still questions about the long-term future of Home Depot, shareholders should be pleased with the new, less arrogant, Home Depot.