Rayovac is a distant third to Duracell in U.S. battery sales. Its parent, Spectrum Brands (SPB), is less than three years out of bankruptcy, while Duracell owner Procter and Gamble (PG) this year announced its 56th consecutive dividend increase.

By many financial measures, including profit margins and returns on equity, Procter & Gamble is the more prosperous of the two companies. Yet Spectrum shares are up 17% this year, while Procter & Gamble's have slid 10%. The S&P Composite 1500 index of large, midsize and small companies is up 5%.

Larry Pitkowsky saw that coming. He and Keith Trauner bought Spectrum shares for Goodhaven (GOODX), a mutual fund they manage, shortly after it opened in April 2011. Today it is the fund's top holding, at 10% of the portfolio.

Mr. Pitkowsky says he was drawn to Spectrum because it was deeply unpopular at a time when its prospects for generating cash were improving. Former bondholders had been converted to stockholders and were dumping their shares, and new management was cutting costs and reducing debt, he says.

Spectrum, whose other brands include Remington shavers, Blag Flag bug killer and Tetra aquarium products, still owes more than $1.5 billion, an amount nearly equal to its stock market value. But it was recently able to replace 12% notes with 6.75% ones. Management says it expects to produce free cash flow of "at least" $200 million this year, or about 12% of Spectrum's market value.

Mr. Pitkowsky still likes the stock. Rayovac is an example of the kind of lower-price brand that shoppers have been switching to of late, he says.

Goodhaven is off to a good start. The 6.5% it has returned over the past year ranks it among the top 10% of the "large value" category tracked by Morningstar Inc., a research firm. That group is made up of funds that invest chiefly in shares of large companies that trade cheaply based on measures like earnings, cash flow and asset values. Messrs. Pitkowsky and Trauner, who previously worked at Fairholme, a top-performing fund in 2010, have so far raised $170 million in assets. Goodhaven has no up-front sales charge and costs 1.1% of assets per year.

The fund is concentrated, with around 20 stocks, and most are much larger companies than Spectrum. All have warts. Jefferies Group (JEF), an investment bank, has seen its stock price plunge 39% over the past year. Mr Pitkowsky says it has been hurt by comparisons to MF Global, whose risky trading ended in a spectacular bankruptcy last year, but he says that Jefferies "is no gunslinger".

Another top holding: Microsoft (MSFT), is struggling to make inroads into tablets and smartphones but remains highly profitable for its personal computer and enterprise software. "We bought because most people had decided to despise the company for reasons that made little sense to us," says Mr. Pitkowsky.

Some holdings may crinkle the noses of even value investors. Sears Holdings (SHLD) isn't profitable, carries heavy debt and is struggling to compete with the likes of Walmart (WMT), to say nothing of Amazon.com (AMAN) .

Then again, everything has a price for those who know how to value troubled assets. Sears shares are up 74% this year.

Another Goodhaven position may seem an unlikely fit. Berkshire Hathaway (BRK.A), managed by renowned value investors Warren Buffett, has in recent decades sold for an average of 60% more than the accounting value of its holdings, thanks to Mr. Buffett's popularity. But Berkshire has lagged behind the broad U.S. stock market of late, in part because it owns housing businesses, and America's housing recovery has been slow.

Berkshire now sells for only about 15% more than its book value. And that, it seems, makes Mr. Buffett a good enough value for Goodhaven.

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