Editor's Note: Arne Alsin's column runs exclusively on RealMoney.com; this is a special free look at his column. For a free trial subscription to RealMoney.com, click here. This article was published Jan. 8 on RealMoney.

Get in front. It's simple but true: Investors who get in front of change make the most money. All of my big stock wins have required anticipation of change -- it's a critical ingredient in the recipe for investment success.

My new stock pick,

Black & Decker

, is about getting in front of what I expect will be several quarters of good news about sales and earnings. It's my

36th pick for

RealMoney

. My open positions are currently up 30%, and positions that have been closed finished up 19%. My list of

Top 10 Turnaround Candidates for 2002, just out of the gate, is up 7%, compared with the

S&P 500's

2% rise.

Drilling Down

One of the great franchises in America, Black & Decker, has established itself over the years as a maker of innovative, high-quality power tools and accessories. Thirty percent of current-year sales are from products launched in the past three years. Besides the Black & Decker brand, the company also sells under the DeWalt, Kwikset and Price Pfister brands, to name a few.

As you can see from the chart, its stock hasn't done much for a few years, but that's about to change.

Black & Decker Blues
Despite recent inactivity, this stock will see brighter days ahead.

TheStreet Recommends

While I seek out companies such as Black & Decker that have a wide disparity between stock value and underlying business value, I also seek companies that are No. 1 or No. 2 in their category. Black & Decker fits that requirement nicely because it dominates the U.S. power tool market with market share above 40%, more than double the next-largest manufacturer.

In addition to power tools, Black & Decker also has a No. 1 or No. 2 market position in other product categories such as security hardware (Kwikset), plumbing faucets (Price Pfister) and fastening (Gripco, Heli-Coil and Parker Kalon).

Margin Leverage

As my regular readers know, I don't invest in companies at peak levels of profitability. I specifically look for companies with margin leverage, where identifiable, specific catalysts could spur a lift to profit margins. For example, at Black & Decker, margins should go higher soon because of better inventory management.

Black & Decker spent most of 2001 working off excess inventory. Inventory levels at two of its biggest customers,

Home Depot

(HD) - Get Report

and

Lowe's

,

(LOW) - Get Report

have recently improved: Sales increased more than inventory at both retailers, suggesting that a cleaner table is set for 2002.

I'm looking for Black and Decker's net margins to rebound more than 6% in this cycle, after an average of 6.5% in 1999 and 2000. I think it has earnings power of at least $4.30 a share in a couple of years. Consensus estimates for its 2002 earnings are $2.57 a share.

Because of the high quality of Black & Decker's brands and business model, the stock historically commands a price-to-earnings multiple in the high teens, making a price target in the high $60s or higher a reasonable expectation. It was trading at $37.09 Tuesday, slightly off from Monday's close of $37.86.

Arne Alsin is the founder and principal of Alsin Capital Management, an Oregon-based investment advisor specializing in turnaround situations. At time of publication, Alsin and/or ACM was long Black & Decker, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Alsin appreciates your feedback and invites you to send it to

arne@alsincapital.com.