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Will stock work later in game?

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Investing in solid companies with short-term woes is like playing chess, says Michael Carmen, manager of Hartford Growth Opportunities (symbol HGOAX; 888-843-7824; 5.50 percent sales charge for the A shares). "It's all about figuring out what will work later in the game," he says.

Carmen seeks stocks that trade for at least 30 percent below what he thinks they're worth. Over the past three years to Jan. 3, the fund returned an annualized 24 percent. Among Carmen's favorite stocks:

Abercrombie & Fitch (ANF). More than a century ago, Abercrombie sold rugged apparel to wealthy outdoorsmen. The New Albany, Ohio, company is still a "sportswear machine," says Carmen, except now it outfits the young and hip. After several years of bland performance, the teen-focused retailer returned to its high-end roots and stopped deeply discounting apparel. Sales rose almost 40 percent, to $1.8 billion, in the first nine months of the fiscal year ended January 2006. Recently $62, the stock trades at 14 times the $4.33 per share that analysts expect Abercrombie to earn in fiscal 2007, according to Thomson First Call.

Cephalon (CEPH). This West Chester, Pa., biotech company, which develops and markets drugs to treat neurological disorders, chronic pain and various forms of cancer, has a slew of new products in the works. This year, it plans to roll out four new drugs, including Vivitrol, for treating alcohol dependence. Cephalon expects revenues to reach as high as $1.4 billion this year. The stock, at $73, sells for 23 times estimated 2006 earnings of $3.14 per share.

Schering-Plough (SGP). A four-year earnings slump following the loss of Claritin's patent protection is over. The Madison, N.J., drug company's products include cholesterol-lowering drugs Zetia and Vytorin, which helped drive up earnings last year. Carmen is enthusiastic about Fred Hassan, who revived Pharmacia & Upjohn in the 1990s and who became chief executive of Schering in 2003. At $20, the stock trades at 34 times estimated 2006 profits of 58 cents per share.

Starwood Hotels & Resorts Worldwide (HOT). Its moniker is less recognizable than its stable of upscale properties: Le Meridien, St. Regis, Sheraton, Westin and the trendy W. The White Plains, N.Y., company owns, operates and franchises more than 850 properties in nearly 100 countries. In November, it agreed to sell 38 hotels to Host Marriott for $4 billion, although it will continue to manage the properties. The stock, at $62, sells for 27 times estimated '06 earnings of $2.34 per share.