Middle of the pack, but still ahead

• No new trades.

When this round began back in January, I predicted that my strategy of buying unloved, out-of-favor market dogs was probably not well-suited to the relatively short time frame employed by MSN Money's Strategy Lab. Nevertheless, there was no reason to think that a well-constructed basket of emerging turnaround situations wouldn't be competitive with the overall market.

Sure enough, the Dog Pound flirted with the lead in this round but ultimately fell short as a few stocks failed to fire in a timely fashion. It looks like I'll finish in the middle of the pack but, more importantly, ahead of the S&P 500 ($INX) and the Nasdaq Composite Index ($COMPX) -- not bad when you consider the limited confines of the portfolio.

The losers

Two of my biggest losers this round, Shuffle Master (SHFL, news, msgs) and Las Vegas Sands (LVS, news, msgs), came from the gaming industry. The former stumbled over a failed alliance and continued poor execution. Though the situation has yet to right itself, this is still a dog worth watching as its leadership position within the gaming products industry makes it a potential takeover candidate. Changes at the top could also ignite a recovery.

As for Las Vegas Sands, the current concern is that the Venetian property in Macau won't live up to pre-open hype and that expense will prove too high. I think they said the same thing about the Bellagio and the Wynn casinos in Vegas, and both are huge successes. Las Vegas Sands might not rebound for two to three months, but within 12 to 18 months look for the stock to be knocking on the door of $100 per share.

The winners

Where we had some success was in the technology and retail sectors, with double-digit gains in NAVTEQ (NVT, news, msgs), Akamai Technologies (AKAM, news, msgs), Jos. A. Bank Clothiers (JOSB, news, msgs) and Chico's FAS (CHS, news, msgs). I also scored a nice 20%-plus move in a little-known biometrics company called Cogent (COGT, news, msgs). After getting slammed a year ago for revenue shortfalls as big contracts were pushed out, the company has rebounded nicely this year amid optimism that one or more of those deals will close by year end. It's a well-managed company with solid financials and heavy insider ownership. Just the kind of out-of-favor company investors should be looking to discover and buy for the long term.

It has been difficult market to play in over the past six months as most of the gains have been concentrated in only a few areas. Large-cap names have dominated as well. I remain anxious about the market's near-term future due to rising interest rates, ballooning debt, the likelihood of added supply and the upcoming political race. Higher energy prices and declining home prices are also pinching the consumer, and that isn't good news for an economy heavily dependent upon consumer spending.

Consequently, I expect the market to become increasingly volatile over the next six months. Fortunately, by following a strategy of buying out-of-favor stocks the macro-economic/market conditions aren't that important -- these aren't momentum names or high beta stocks that are apt to get crushed with a market correction.

Hopefully, you have learned from my approach and can start to identify companies that have the makings of solid turnaround candidates. If so, you should enjoy some big winners in the quarters and years to come.

As always, I've learned a great deal from my fellow Strategy Lab participants and from the Lab audience. Finally, thanks goes out to all the folks behind the scenes at MSN Money who work hard to make the Strategy Lab an excellent tool for new and experienced investors.