Crafty portfolio designs and names have come and gone over the years. Some have been good and some have been bad. The newest that we reviewed from a new Stifel research report,appears to have derived the name from the 1989 cult movie hit “Bill and Ted’s Excellent Adventure.” While the name may be amusing, the idea behind the portfolio makes good sense, and the support data seems to indicate that it may be just the ticket for investors with a three-year time horizon.

The Stifel thesis for favoring stocks of “Un-Excellent” over “Excellent” companies is easily defended, since high returns, which represent the hot, or top companies in the Excellent portfolios invite new entrants that drive can down profitability, while poor returns not explained by industry-cyclical behavior may cause competitors to exit, lead to management changes or acquisition by financial or strategic buyers even after accounting for bankruptcy/severe financial distress.

The bottom line is that the Un-Excellent portfolio is a contrarian play on stocks and sectors that is given a three-year span to play out. The Stifel supporting data proves that it works.

We picked one stock from each sector in the Un-Excellent portfolio to give readers an idea of the names that Stifel thinks will work in this format.

Alcoa Inc. (NYSE: AA) stock took off last October from a long-term sideways base and is up almost 50%. Since being booted from the Dow Jones Industrial Average, it has had the last laugh as its stock price has climbed considerably in a relatively short time. A lot of optimism is built into Alcoa’s rally, based on firming aluminum prices and the prospect of a steady global economic recovery. Investors are paid a 0.8% dividend. The Thomson/First Call price target for the stock is $13.11. Alcoa has blown past that and closed Wednesday at $14.64 a share.

ALSO READ: Four Stocks That Can Hold Up Well in a Big Market Sell-Off

Anadarko Petroleum Corp. (NYSE: APC) is one of the biggest independent oil and gas producers in the country, with exploration or production work in all major domestic drilling areas, as well as in South America, Africa, Asia and New Zealand. Worldwide, natural gas makes up just over half of Anadarko’s reserves, but 87% of the new wells it drilled in the United States last year were gas wells. The company has daily production over 2.6 billion cubic feet. Investors are paid a 1% dividend. The consensus price target is $117.23. Anadarko closed Wednesday at $109.58.

Boston Scientific Corp. (NYSE: BSX) has gone sideways over the past year, and more analysts on Wall Street are warming up to this former high-flyer. The company has told analysts that they plan to continue to buy back more stock. They also indicated that they are shooting for 25% operating margins by 2017. That kind of goal could bring much higher stock prices to what is truly a contrarian play. The consensus price target for the medical device maker is $14.13. The stock closed at $12.64.

Computer Sciences Corp. (NYSE: CSC) has posted decent results, and yet the stock still has a hard time gaining much traction, despite moving higher. The company has shifted its focus from infrastructure sales to more profitable software and services. Last year it purchased big-data rival Infochimps in an effort to expand its platform and revenues.

While CSC faces longer term structural competitive challenges, near term the company has a solid book of business. Management has taken a step, such as offshoring, to reduce operating expenses. This helps to make it an ideal name for the Un-Excellent portfolio. Investors are paid a 1.5% dividend. The consensus price objective for the stock is $65.27. Shares closed Wednesday at $63.63.

ALSO READ: Cowen Has the Ultimate Social Media Stock Trade

Legg Mason Inc. (NYSE: LM) is a somewhat forgotten financial name to make the Stifel portfolio. An interesting sidebar in this selection is that Stifel recently acquired Legg Mason Investment Counsel & Trust Co. (LMIC) in its Global Wealth Management segment. LMIC is engaged in providing investment advisory and trust services to retail as well as institutional clients and currently has more than $9 billion in assets under management. The shareholders are paid a 1.3% dividend. The consensus price target is $47.11, below Wednesday’s close of $50.93.

Safeway Inc. (NYSE: SWY) recently settled investors’ lawsuits challenging Cerberus Capital Management’s $9.2 billion buyout by agreeing to turn over proceeds from future real-estate sales. The settlement clears the way for Pleasanton, Calif.-based Safeway to proceed with the $40-a-share sale to New York-based Cerberus, which owns the Albertson’s grocery chain. In March, Cerberus agreed to buy Safeway for $7.64 billion, or $32.50 per share, in cash.

Pending other transactions, the deal could top $9 billion, or about $40 per share. Clearly at a discount to that purchase price, the Stifel portfolio managers are just employing a little deal arbitrage. Investors are paid 2.7% dividend. The consensus price target is $36.20. Safeway closed Wednesday a $34.08.

Vulcan Materials Company (NYSE: VMC) is a top materials name in the Un-Excellent portfolio. Despite a first-quarter loss of $0.28 a share in May, analysts polled by Thomson Reuters see its full-year earnings rising 450% to $0.88 a share. It would be the best result in six years. This is again, another solid contrarian play put on by the portfolio team looking for solid economic growth over the next few years. Investors receive a tiny 0.3% dividend. The consensus price target for the stock is posted at $66.46 Vulcan shares closed Wednesday at $65.19.

ALSO READ: Seven Alternative Energy and Clean-Tech Stocks With Massive Long Term Upside Potential

It is important to remember these are current June “Un-Excellent” holdings, and they are posted to give our readers an idea of what the portfolio will like in terms of the type of names and sectors that the Stifel team will buy. The actual three-year portfolio will be selected and formed on June 30, 2014, based on their research screens of fiscal years 2009 to 2013 data. Given the long-term success of this strategy, readers may want to stay tuned for an update after the portfolio is finalized.

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.