CARL MARKER HAS

been a value investor for more than two decades, searching for beat-up companies with rising earnings. And a glance at the stocks in the portfolio of his IMS Capital Value fund, which is dotted with insurers, grocers and home builders, offers no hint that he has ever strayed from a strict Warren Buffett approach.

Dig a little deeper, however, and you'll find that Marker shares some strategies with the hyperkinetic Jim Cramer. No, he's not throwing chairs or mugging for the camera. But he is using some stock-picking strategies that his peers in the value-investing world may find alarming: Marker closely monitors Wall Street analysts' earnings forecasts, for instance, and tracks the momentum of share prices. Traders use such data to capitalize on a stock's short-term movements, which is a far cry from the fundamental analysis that value investors perform to find stocks at bargain prices.

These days it's not easy for a value investor to find a bargain. In recent years the line between value stocks and growth stocks has become increasingly blurred, with value investors scooping up traditional growth stocks such as Cisco Systems and Oracle, while growth investors are buying value stalwarts such as Caterpillar and Boeing. Meanwhile, investors like Marker are digging through the sleepy discount bins for stocks that are ready to rise and shine.

And therein lies the challenge: You can be right in your analysis that a stock is deeply undervalued, but without a catalyst it can take years for the investment to wake up. That's where the day-trading strategies come in. While value managers seldom pay attention to Wall Street's buy and sell ratings, they do take notice when analysts raise or lower their earnings forecasts and with good reason. A change in expectations often indicates tangible changes are under way that will affect the stock price. According to Emory University finance professor Narasimhan Jegadeesh, stocks of companies whose earnings estimates have been raised outperform those of companies whose estimates have been cut by six percentage points over the following six months.

The research is even more compelling when applied to value stocks alone. Josef Lakonishok, a professor at the University of Illinois, pioneered this investment strategy in the 1980s and later made it and other behavioral-finance principles the basis of LSV Asset Management, a firm he cofounded in 1994. Since little is expected of battered stocks, Lakonishok found, it doesn't take much good news to boost them. Investors, meanwhile, expect growth stocks to be perfect, leaving them vulnerable to even the slightest disappointment.

Another technique borrowed from short-term investors: seeking out stocks that have been marching higher. While it might seem that value managers would avoid stocks that have already begun to move up, research has shown that stocks in the early stages of a rebound tend to keep rising.

This sounds like a beautiful combination to us, so we started our search for stocks that were undervalued according to one or more traditional metrics, such as price/earnings, price/sales or price/cash flow. We then narrowed the list by looking for companies for which analysts have been raising their 2007 earnings estimates and whose stocks have been climbing in the past three months. All signs suggest these companies are awakening from their slumber.

Limited Brands (

Retailer Limited Brands' crown jewels, Victoria's Secret and Bath & Body Works, generate significant cash and boast mega-brand recognition. Now that this former growth darling has conquered just about every mall in the U.S., however, investors have stepped aside, worried that new growth may be hard to come by. But the Columbus, Ohio-based firm has begun to make believers out of retailing analysts. And the stock, which has spent the past several years bouncing around in the teens and low $20s, has begun climbing higher. That's just the type of price momentum that investors like Neil Hennessy of the Hennessy Funds want to see over a three- or six-month period because it suggests a company has hit an inflection point, which he says is like starting a baseball game with a two-run lead.

After spending two decades spinning off divisions like Abercrombie & Fitch and Limited Too, the company agreed in November to buy Canadian intimate- apparel retailer La Senza for $628 million its first major acquisition since the mid-1980s. The purchase sets the stage for a push abroad. While Victoria's Secret enjoys international recognition, thanks to its scantily clad models, it does not yet have a retail presence abroad. The La Senza purchase brings in a management team with global experience that will help with an international push, says James Benson, who covers the company for Harris Associates.

Bath & Body Works and Victoria's Secret make up about 70% of Limited's $11 billion in expected 2006 sales, and recently, the two chains have been posting eye-popping gains in sales at stores that have been open at least a year 13% and 18%, respectively levels not seen in years. Even the company's more staid chains, like Express and The Limited, are improving as new management tries to reconnect with customers who were alienated when the brands moved too far upscale.

Perhaps the most exciting news for investors is the company's plan to expand existing Victoria's Secret stores, signaling that it's not just a mega-brand but also one with growth still ahead of it. Benson expects the retailer to create more stores within stores, focusing on its youth brand, Pink, for example, and on beauty products. "Its opportunities are probably bigger than people think," he says, noting that these changes should continue to drive growth for the next three to five years. If analysts' estimates are any guide, Wall Street has begun to share Benson's optimism. Earnings estimates for 2007 have risen 7% in recent months, to $1.94 a share. That's 12% over what the company is expected to report for 2006.

Remember the little engine that could? Norfolk Southern, which operates up and down the Eastern Seaboard, shares some traits with that classic "I think I can, I know I can" story. For example, concerns about an economic slowdown and slowing freight volumes weighed on the company's stock in the third quarter of last year, in part because of the company's exposure to autos and building materials. While some investors backed away, others were convinced that the company still had a head of steam. "It's in a growth industry that has to pull out of its cyclical image," says Don Hodges of the Hodges Fund, noting that there is plenty of demand for some of the other goods Norfolk hauls, including ethanol, coal and container shipments from Asia.

Norfolk pulled through to deliver a third-quarter earnings surprise even as freight volume growth decelerated, with profit climbing 38%, to $416 million, or $1.02 a share 20 cents higher than analysts' expectations. Its ability to raise prices and its operating prowess helped offset slowing volume. Andrew Meister, transport and industrials analyst at Thrivent Financial, says that even if volume softens, Norfolk could perform well because it can continue to find better ways to run the railroad.

Norfolk's long-term focus has set it apart from peers in the past couple years. During the last downturn, the company invested in its network, positioning it to benefit from a surge in global trade and an economic rebound in the U.S. With that investment behind it, Norfolk now has the flexibility to reduce capital spending if volume slows further. "They have enough levers to pull in a down cycle so that it won't get ugly," says T. Rowe Price industrials and rail analyst Peter Bates.

The Norfolk, Va.-based firm has also been buying back stock and is generating plenty of cash for additional purchases, which should serve as another catalyst for the next 12 to 18 months, Bates says. In the past three months, analysts' consensus earnings estimates for 2007 have risen 9%, to $4 a share, suggesting 12% growth. The stock has come off near-term lows, but Bates thinks Norfolk can keep chugging ahead. "I don't think all the good news is in the stock," he adds. "I think it can earn more than $4 in 2007 and in 2008 and can still grow beyond that."

Grupo Televisa (

In a drama worthy of one of its popular telenovelas, Televisa, the world's largest producer of Spanish-language programming, has been sparring with its partner Univision, the U.S. media company, which put itself up for sale last year. First, Televisa, which owns 11% of Univision, joined in the bidding, worrying investors that it might overpay for the company. That chapter ended with Televisa's losing out to a group of private-equity investors.

Then, in a surprising twist, Wall Street took a closer look at Televisa's core business prospects. In the past three months, analysts have raised their 2007 earnings estimates more than 9%, to $1.36 a share, and the stock has climbed 46%. But it's too soon to change the channel, according to Credit Suisse Latin American media analyst Andrew Campbell. He sees several catalysts that can drive Televisa's shares even higher.

The company's core broadcasting business continues to generate an impressive profit margin of 50% and could benefit from losing Univision to other suitors. Because of its close ties, Univision enjoyed sweetheart rates for Televisa's wildly popular programming. But now that their relationship has changed, Univision may have to pay up, says Guzman & Co. media analyst Philip Remek.

Televisa is also laying the groundwork for future growth. David Joyce, a media analyst at Miller Tabak, notes that the company is creating joint ventures with foreign media companies to start new channels like La Sexta, in Spain, and coproduce shows like the comedy Amor Mio. The firm is also making strides in digital media with a new service that lets Web users download music, movies and TV shows. And in February, Televisa plans to launch a voice, Internet and TV service the same "triple play" service that has been a home run for U.S. media companies.

The cliffhanger to the story, if there is one, is Televisa's cash hoard, which should grow to about $2.5 billion, or $4.93 a share, if the company sells its stake in Univision, as predicted, later this year. Analysts expect Televisa to share some of that with shareholders, perhaps through a special dividend.

Like Norfolk Southern, Republic Services has faced a chorus of naysayers who believe a slowing economy will curb the garbage hauler's gains. But thanks to a broad geographic footprint and some timely price hikes, Republic has won over analysts, who have been raising estimates for 2007 earnings.

Much of Republic's business is resilient to the economy's ups and downs, in part because of the markets it dominates, including the Sun Belt and Las Vegas. Both areas are experiencing strong population growth that should keep business expanding faster than the economy. The Fort Lauderdale, Fla.-based firm also generates about a third of its sales from franchise markets basically monopolies granted by the government that produce high-margin, long-term contracts. And in a competitive industry, Republic has targeted second-tier markets, such as Harrisburg, Pa., and Charleston, S.C., where it doesn't have to butt heads as frequently with larger rivals.

Wall Street has chastised Republic in the past for paying attention to cash flow and return on investment instead of following the path of its larger rivals and bulking up growth with acquisitions. Those companies are now following Republic's lead. After years of focusing on getting bigger, even if it meant lowering prices to attract new business, other waste haulers are now concentrating on profits. That helps Republic because it can more easily raise prices now that its competitors are also boosting their rates, says T. Rowe's Bates.

Republic's stock has climbed 160% since 2001. But Bates still sees further upside, with the company's stable business and ability to generate cash which set it up to pay higher dividends and boost buybacks enticing more investors. He expects 10 to 12% earnings growth for the next three years plus a 2% dividend yield, which produces a 12 to 14% annual return not bad for a low-tech business like trash.

Manpower (

The world's second-largest staffing firm has a not-so-secret weapon that is helping it repeatedly surprise Wall Street with strong profit growth. While Manpower is based in Milwaukee, it generates the bulk of its business abroad with almost 70% coming from Europe, the Middle East and Africa. While those regions are behind Manpower's recent profit surprises, investors still seem focused on the U.S. portion of the business, which makes up just 12% of sales, expected to total $19 billion in 2006.

For some time Manpower's investment in Europe was held against it, even weighing on the company's valuation. But now that Europe is strong, some investors are fixating on a slowdown in hiring in the U.S., says Jeff Silber, education and staffing analyst at BMO Capital Markets.

With economies across the Atlantic perking up, conditions are perfect for a staffing company like Manpower. Its French operations, which make up about a third of sales, are improving now that a major competitor has become less aggressive on pricing. All signs suggest that Manpower's business in Europe (not including France), the Middle East and Africa which makes up 35% of sales should continue to drive profit growth as Europeans embrace the idea of using highly skilled temps as part of their corporate fabric.

It's concrete factors like these that value investors like to see to validate those shorter-term momentum indicators. Analysts have increased their 2007 earnings estimates for Manpower by 8% in the past three months, to $4.31 a share, and the stock has rallied 23%. But Frank James, head of the James Advantage funds, expects further upside, precisely because of that momentum. "The company is undervalued relative to the market," he adds. "This is not a glamour name but a solid earnings performer, and the market is not expecting much from it." In other words, a value investor's dream.