BOSTON (TheStreet) -- As investment strategists are predicting a range-bound equities market this summer, going on a quest for value may pay off. Beaten-down stocks have the potential for price appreciation while at the same time producing higher-than-average yields.

That narrows the field to a handful of large-cap stocks, but intrepid investors may also find mid-cap and small-cap shares that are diamonds in the rough.

Indeed, small-cap value funds are finding it tough to find cheap stocks after two bull-market years, as indicated by the high cash positions in their portfolios. For example, the

Pinnacle Value Fund

(PVFIX) - Get Report

, which gets a top five-star rating from Morningstar, was holding 53% cash at the end of the first quarter, which, it turns out, is surprisingly common for small-cap funds now.

Todd Rosenbluth, the mutual-fund industry analyst at ratings firm Standard & Poor's, told


that given the market's recent volatility, large-cap value stocks look appealing since they can offer downside protection as well as room for capital appreciation when the market recovers. Plus, they're less volatile. Growth stocks, on the other hand, are more closely tied to the fortunes of a robust economy.

Over the past four weeks, the

S&P 500 Index

is down 2.7%, with every industry sector showing a loss, ranging from real estate's 0.7% dip to technology's 4.7% drop.

Sectors that have held up best over the current quarter through June 20 are health care, up 6.2%; consumer staples, up 4.9%; and utilities, up 4.2%.

In health care, drugmaker


(PFE) - Get Report

is one of the most popular holdings of many large-cap value funds. It is the largest holding at the $171 million

PNC Large Cap Value Fund

(PLVAX) - Get Report

, at 5% of the portfolio, and at the $478 million

Fidelity Blue Chip Value Fund

(FBCVX) - Get Report

, at 5.3%.

The $718 million

Legg Mason ClearBridge Large Cap Value Fund

(SINAX) - Get Report

, which gets a five-star rating from Standard & Poor's, favors consumer-staples stocks, including cigarette maker

Philip Morris International

(PM) - Get Report

and household- and personal-products company


(KMB) - Get Report

, both of which are in its top four holdings.

Here are

10 stocks

that are currently the biggest positions of top-rated value-oriented mutual funds:



(PFE) - Get Report

is the world's largest pharmaceutical firm, with annual sales of about $70 billion, 90% of which is prescription drugs. As noted above, Fidelity and PNC own large positions in Pfizer.

In October 2009, Pfizer acquired rival drugmaker Wyeth for $68 billion, and the acquisition is expected by analysts to pay off with cost savings in the development of new drugs.

Pfizer has strong cash flows and carries a 4% dividend yield, more than the benchmark Treasury bond. What's more, shares of the $161 billion market-cap company are up 19% this year and 40% over 12 months, rising at about double the pace of other drug stocks.

Philip Morris International

(PM) - Get Report

makes up 3.2% of the

Legg Mason ClearBridge Large Cap Value Fund

(SINAX) - Get Report

. The $120 billion market-cap company is the world's largest publicly traded cigarette maker, with 16% of the non-U.S. market.

After a strong first quarter, Philip Morris raised its forecast for 2011 earnings by 20 cents per share to a range of $4.55 to $4.65 per share. Analysts had been expecting $4.48.

The stock has a 3.8% dividend yield and a forward price-to-earnings ratio of 13. Its shares are up 10% in the past three months and 18% this year.


(KMB) - Get Report

is a top pick at the

Invesco Diversified Dividend Investor Fund

(LCEIX) - Get Report

, at 2.5% of the portfolio.

The company's products include bathroom tissues, diapers, feminine products and paper towels. Its brands include Kleenex, Scott, Huggies, Pull-Ups and Kotex.

About 45% of Kimberly-Clark's sales are outside North America, and the international markets are its fastest-growing regions as residents of emerging economies clamor for goods that they perceive improve the quality of their lives.

Kimberly-Clark pays a whopping 4.2% dividend yield and offers a forward price-to-earnings ratio of a very low 12.7. Its shares are up 8% this year and 11% over the past 12 months.


Fidelity Blue Chip Value Fund

(FBCVX) - Get Report

added to its stake in cigarette maker



in the first quarter.

The Food and Drug Administration (FDA) released its new package-labeling rules this week and, although the new images are graphic, they're not expected to impact sales very much.

Lorillard's top-performing brand is the menthol cigarette Newport, and 90% of the company's sales volume is in menthol products.

Standard & Poor's, which has a "buy" rating on its shares, says "we think discount-brand volumes, which rose 30% in 2010, will post strong growth through 2011, offsetting some of the expansion we forecast in gross margins. We also see volumes in 2011 boosted by the introduction of Newport non-menthol."

Lorillard has a projected 4.7% dividend yield and a forward price-to-earnings ratio of 12.9. Its shares are up 40% this year and 55% over the past 12 months.

Morningstar has a $120 price target on Lorillard's shares, which is an 8% premium to its current price. S&P has a $111 price target.


American Century Value Institutional Fund

(AVLIX) - Get Report

, which gets a five-star rating from Morningstar, has

Johnson & Johnson

(JNJ) - Get Report

as its second-largest holding, at 3.2% of the portfolio.

Johnson & Johnson is the world's largest and most diverse health-care company, selling drugs, medical devices and consumer products. The pharmaceutical division makes up 35% of total sales.

The company agreed to acquire drugmaker Synthes in April for $21.3 billion, and the deal is expected to result in significant operating synergies which should kick in during the first half of 2012.

Morningstar has a $75 price target on it, which is a 14% premium to its current price. It also pays a hefty dividend yield, at 3.4%. The shares are up 9.3% this year, including a 14% gain in the past three months. Johnson & Johnson is up 16% over the past 12 months.

One of the top picks of

Pinnacle Value

(PVFIX) - Get Report

, a $56 million small-cap value fund that carries a five-star rating from Morningstar, is

Wesco Financial

(WSC) - Get Report

, a holding company that owns insurance, furniture rental and steel-service businesses.

Its shares trade at almost $386, and it has a tiny yield of 0.43%. Wesco Financial has a market value of $2.7 billion.

Thomson-Reuters has it rated "hold." But

Warren Buffett's

Berkshire Hathaway

(BRK.B) - Get Report

owns 80% of the company's shares, which should help explain its lofty share price.

Wesco Financial's shares are up 5.3% this year and 13% over the past 12 months.

The $2 billion

RidgeWorth Mid-Cap Value Equity Fund

(SMVTX) - Get Report



(TDW) - Get Report

its top equity pick.

The company operates the world's largest fleet of service vessels, which are contracted by offshore energy firms to transport supplies and personnel to offshore rigs and tow mobile rigs to new destinations worldwide.

Morningstar has a $62 price target on the company, which is a 19% premium to its current price.

Morningstar analysts say that, although revenue fell nearly 10% in fiscal 2011, "we expect the company to enjoy a rebounding top line in the near term due to continued fleet expansion and high oil prices, although we still think free cash flow improvements will be limited by heightened capital expenditures."

Tidewater shares are down 4% this year but up 20% over the past 12 months. The company has a market value of $2.7 billion.


T. Rowe Price Mid-Cap Value Fund's

(TRMCX) - Get Report

top equity pick is oil-industry giant

Marathon Oil

(MRO) - Get Report

, at about 2% of the fund.

Morningstar said in a recent analysts report that "the outlook for Marathon has changed dramatically in the past year. A sharp recovery in refining margins has boosted the outlook for its downstream assets."

Marathon Oil has a yield of 2%, and its shares are up 39% this year and 54% over the past 12 months.

S&P has a $64 price target on its shares which is a 20% premium to its current price. The energy company has a market value of $38 billion.

Vanguard Selected Value's

(VASVX) - Get Report

largest stock holding is

Stanley Black & Decker

(SWK) - Get Report

, at 2.4% of the portfolio.

The 2010 merger of Stanley and Black & Decker created the global leader in hand and power tools, with a market value of $12 billion.

In addition, by combining the largely complementary businesses within the security and industrial segments, the company is in a position to benefit from big cost savings, which should lead to enhanced profitability and return for shareholders, says Morningstar.

The research firm adds that "the company possesses substantial growth opportunities as sales from emerging markets accounted for less than 15% of total revenues in 2010."

Stanley Black & Decker has a current yield of 2.34% and a forward price-to-earnings ratio of 11.4.

Morningstar's fair-value price on its shares is $86, a 23% premium to the current price. Shares are up 4% this year and 25% over the past 12 months.

Diamond Hill Small Cap

(DHSCX) - Get Report

, a $912 million fund with a three-star rating from Morningstar, has

Assured Guaranty

(AGO) - Get Report

as its top equity position.

Bermuda-based Assured Guaranty provides credit-enhancement products to the municipal finance, structured finance and mortgage markets. Credit-enhancement products are financial guarantees or other types of support that seek to improve the credit of underlying debt obligations.

Assured Guaranty has a current yield of 1.1% and a forward price-to-earnings ratio of 5.1.

Morningstar says its shares' fair value is $23, about a 43% premium to its current price. S&P has an $18 price target. The stock is down 11% this year, but up 6% over the past 12 months, giving the company a market value of $3 billion.

>>To see these stocks in action, visit the

10 Value Stocks to Make Money in 2011

portfolio on Stockpickr.

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.