10 Dogs Ready to Bark in 2004

Group 1: Mature Turnarounds

Companies like these are far enough down the restructuring path that investors can be reasonably certain that the effort is going to work. For example, about 18 months after the company emerged from bankruptcy reorganization, Washington International clearly has regained sufficient customer confidence to produce a growing backlog of engineering and construction work, including important security business. The stock still is likely to appreciate in 2004 -- $40 is a reasonable target price for a potential 18% gain, but investors shouldn't anticipate anything like the 132% gain the stock has racked up over the last 12 months.

Boeing, which has climbed off a 52-week low of $24.73 to gain 60%, also belongs in this group. That's largely on investor faith in the proven turnaround abilities of new CEO Harry Stonecipher. Long-term investors still can earn a solid return from that turnaround, but the quick bounce is gone. Add Scholastic, publisher of the Harry Potter series, here as well.

Group 2: Reasonable-Bet Turnarounds

Companies in this group have taken significant steps to implement a clear turnaround plan. Examples include Schlumberger's sale of the bulk of its Sema technology unit, a bad fit almost from the day in 2001 when the oil-services company overpaid to acquire the business, and the company's plan to sell a stake in its smart-card unit in an initial public offering in 2004. Those are all part of Schlumberger's plan to focus on its oil-services business. Investors can see the other side of that effort -- the reinvestment in that core business -- in Schlumberger's acquisition of 26% of PetroAlliance Services, a leading Russian oil-service provider.

Doubts remain in many investors' minds about the growth prospects for the oil-services sector. Yet with revenue up 14% over last year, according to Sanford Bernstein, and projected to climb another 10% next year, those doubts seem overblown. Plus, the doubts do mean extra profit potential: I think a reasonable target price for Schlumberger is $63 a share, about 25% above recent prices. In this group along with Schlumberger, I'd put HCA -- a current Jubak's Pick with a target price of $54 a share -- AK Steel and Plum Creek Timber.