Overlooked Stock Picks from a Five-Star Trader

Andrew Fisher

They're not the most exciting companies on the stock exchanges, and five-star trader Neil Hennessey says that may be just the point.

5 Stars, 5 Picks, 5 Days

The president and portfolio manager of Hennessy Funds offered up five overlooked stocks for CNBC's "5 For 5."

"All these companies that we're talking about have a low price-to-sales earnings; their earnings are higher than the previous year; they have good relative strength," said Hennessy.

"There's a lot of breadth throughout the whole market," he added. "Nobody hears about some of the companies that we find through our quantitative means."

Hennessy's first pick is Warnaco. "Warnaco is just an apparel maker; a lot of people don't even know the company. It's Calvin Klein, it's Speedos, different name brands."

Hennessy's Stock Picks

Next is Dick's Sporting Goods. "That company's done extremely well. If you've ever gone in one of those stores, it's like going into a Costco, but it's all outdoor equipment and guns; you name it, it's there."

What about AK Steel? "It's just flat-rolled steel," said Hennessy. "They're mainly in the auto and construction business. Can you imagine if autos and construction decide to come back at some point in time, how AK Steel's going to do?"

Owens-Illinois is another company he sees as wrongly neglected by investors. "It is a glass container business. How exciting is that? But they make money, they have a low price-to-sales."

And if you don't like any of his first four picks? Try Terra Industries. "Do the fertilizer business!" he says. "Terra Industries is in crop protection. Here's a company that the price-to-sales might be getting a little bit rich -- but it's a very well-run company."