Three Stocks With High Recovery Potential

Although the cardiac stent market is becoming more competitive with the entry of new products from Abbott Labs(ABT Quote) and Medtronic(MDT Quote), Boston Scientific remains the market share leader. It is also seeing strong results for cardiac rhythm management products, with sales rising more than 10% year over year in the third quarter. As the economy recovers and continues to pay down debt, I look for this stock to be a top performer in the medical devices sector next year.

As usual, I am going to run out of room before I run out of stocks to talk about, but I want to mention some other companies with high scores that you should look into. Electro Scientific(ESIO Quote) just settled with activist investor David Nierenberg of D3 Partners about the voting rights of his 15% interest in the company. D3 is pushing the company to use its $150 million cash stockpile to buy back stock. The fund has a record of winning these battles and increasing shareholder value.

Sunstone Hotel Investors(SNO Quote) also made the list of companies with high scores on the scale. I believe it is the very best of the lodging REITS, with great brands and a strong balance sheet. At these levels, even if I am early, the dividend makes it worth the wait.

The Piotroski score has been tested in the classroom and in the market as a way to find companies with strong recovery potential. It belongs in every value investor's toolbox.

This was originally published on RealMoney on Dec. 22, 2008. For more information about subscribing to RealMoney, please click here.