NEW YORK (MONEY Magazine) - You know that feeling when your bat hits the ball dead-on or you swing the golf club effortlessly in an ideal arc.

MONEY got that same feeling about an overlooked corner of the stock-picking universe. It's a place where companies are big enough to command their markets and take advantage of cost-efficiencies, yet small enough to grow fast and yield hidden opportunities. It's the investing equivalent of the sweet spot.

This area comprises roughly 106 companies ranging from $15 billion to $45 billion in market value. Above that are the 50 biggest blue chips, which account for more than half the value of the S&P 500.

Further down the food chain are the midcaps and small-caps that may be growing superfast but also entail more risk and less liquidity. The middle ground offers many of the advantages of both extremes.

"We think investors can always find value in that group of stocks," says Rick Drake, manager of ABN Amro/Chicago Capital Growth fund, which has bought numerous such companies. "While the Microsofts of the market are running up against the ceiling, these companies can still find growth opportunities."

Consider the numbers: Wall Street's forecasted average long-term growth rate for the sweet-spot group is 15 percent vs. the S&P 500 index's 7 percent. Short-term prospects are even snappier -- 37 percent earnings growth is expected next year vs. the index's 13 percent.

A number of the companies in the sweet spot -- including Merrill Lynch, General Motors, Sun Microsystems and Tyco -- are fallen blue chips that have lost billions in market value apiece. Others are entrepreneurial companies -- like Cardinal Health, Concord EFS and Illinois Tool Works -- that have just begun to reach a critical mass.

"You're either looking for the phoenix, where you've been given the opportunity to buy a great company at a cheap price, or for the company that has the potential to be a very large company but is still in this netherland," says Christopher Davis, co-manager of Selected American.

Below are six of our favorites: Boeing, Cardinal Health, Comcast, Conoco, FleetBoston Financial and Target.

Let's consider all the reasons not to buy Boeing stock. First, few companies were hit harder by the terrorist attacks last year. Boeing's (BA: Research, Estimates) commercial aircraft division, which accounted for 60 percent of its $58 billion in revenue last year, has been devastated by the downturn in the travel industry. Boeing figures it will deliver just 380 planes in 2002, down from 527 last year; next year, those numbers are expected to fall further, to below 300.

Then there's Boeing's military business, which recently took a blow from losing the highly lucrative Joint Strike Force fighter contract to competitor Lockheed Martin. And at a time when accounting revelations have been sinking stocks, a recent BusinessWeek cover story slammed Boeing for financial shenanigans at the time of its 1997 merger with McDonnell Douglas.

The bottom line: In the first quarter of this year, Boeing reported a loss of $1.25 billion vs. a profit of just about that amount in the same period last year.

So why do we think that Boeing, a fallen blue chip that has seen its market capitalization drop by $21 billion from its one-time high to a recent $35 billion, is now one of the most intriguing plays in the sweet spot? Because the bad news, historic accounting revelations and rotten times for the aircraft industry have driven the stock price so far down, investors have been given an opportunity to buy one of the country's great industrial companies on the cheap.

At $42.34 a share, Boeing stock now trades at almost 14 times this year's estimated earnings vs. an average of 19 times for major aerospace and defense companies, and at just 0.6 times revenue vs. 1.1 times revenue for the aerospace and defense group.

What's more, once airlines start placing orders for jets again -- as they undoubtedly will to replenish aging fleets -- Boeing is positioned to take off. The company's planes (including its 737s, 747s, 757s and 767s) lead the commercial aircraft business.

While investors wait for the airline industry turnaround -- and even bulls don't expect it to happen until 2003 or 2004 -- they can take comfort in the fact that Boeing is more diversified than it had been in previous downturns, and better managed.

Consider those first-quarter results: While the overall numbers were grim, Boeing managed to increase operating margins from 10 percent to 12 percent in both the commercial airplane division and the military aircraft and missile systems unit.

Susan Byrne, manager of the Gabelli Westwood Equity fund, figures Boeing shares could hit $65 in the near term when Wall Street recognizes that the ailing giant is poised for a turnaround.

"Boeing is now better on the upside and more insulated on the downside," she says. We couldn't agree more.

Drug stocks, once a sure thing, have become an increasingly tough bet, as pharmaceutical makers face an onslaught of generics and a lack of blockbusters. But there are still some smart ways to play the aging of America and the consequent increase in demand for prescription drugs. We think Cardinal Health (CAH: Research, Estimates), with $30billion in market cap, is one of them.

The country's largest distributor of drugs and medical supplies, Cardinal simply sells what hospitals and doctors want to buy; it doesn't matter to Cardinal who makes these pills and potions. The company has also been expanding into other fast-growing businesses, such as pharmaceutical technology (it is responsible for inventing the dissolve-on-your-tongue preparations now used for Claritin allergy pills, for instance) and medical information (its Pyxis automated drug dispensers are the market leader).

Cardinal chief executive Robert Walter has been on an expansion kick, chalking up 20 percent-plus earnings growth for 14 consecutive years through a combination of internal growth and acquisitions (13 of them in fiscal 2001).

The result: Cardinal has been one of the top performers in the sweet spot. Shares have risen 1,049 percent over the past decade vs. an average of 669 percent for the sweet-spot group.

All signs point to Cardinal's growth continuing. Lehman Brothers analyst Lawrence Marsh notes in a recent report that Cardinal has roughly 30 percent of a $160 billion business that has been growing at double-digit rates. And it has the cash to keep making acquisitions as well: In this fiscal year (which ends in June), Cardinal is expected to generate some $2.3 billion in operating cash flow, up 26 percent from the previous year.

"Cardinal is gaining a lot of market share, increasing margins and acquiring proprietary products that they can sell at a higher profit," says ABN Amro's Drake, who has bought enough shares of Cardinal to make it his fund's largest holding.

At around $65, its shares trade at about 25 times this year's earnings estimates. That slight premium to the market's P/E of 22 becomes less important when you consider that Cardinal is expected to grow nearly three times faster than the S&P 500 in the long term. Drake thinks Cardinal stock will outperform the broader market by 20 to 30 percent over the next year or so.

Pure-play cable stocks are down an average of 38 percent this year. Accusations of questionable accounting at Adelphia Communications have cast a pall on an industry already burdened by heavy capital-equipment upgrades. But Comcast, we believe, has been unfairly penalized. Currently the third-largest cable-television operator, Comcast has seen its shares fall nearly 40 percent from their highest point this year on nothing more than emotion.

At the same time, the company is preparing to merge with AT&T Broadband -- a combination that will leapfrog the new AT&T Comcast ahead of AOL Time Warner (parent of this Web site and of MONEY magazine) to the No. 1 spot in the industry with 22 million basic subscribers, reaching 39 million homes.

Normally, you'd expect a deal this big to be reflected in the stock price. Yet at a recent $27.15, Comcast trades at nearly 10 times its 2001 EBITDA (earnings before interest, depreciation, taxes and amortization, a critical valuation measure in the cable industry), on the low end of its five-year range.

What if the merger is somehow derailed? That's unlikely, given that both boards have blessed the deal and analysts expect regulatory approval to follow, but we'd still think Comcast (CMCSK: Research, Estimates) is a smart play.

In the past five years management has more than doubled its subscriber base to 8.5 million, while investing wisely in upgrading its cable systems, a project that is now 95 percent complete. With the strongest balance sheet in the industry, Comcast generated $212 million in free cash flow last quarter, becoming the only cable operator to report positive cash flows.

Another plus: Comcast owns a majority stake in QVC, the leading shopping channel, which reaches 82 million homes in the U.S. and posted 11 percent revenue growth last year.

Investors who buy energy stocks tend to flock to big names like ExxonMobil and ignore smaller companies like Conoco and Phillips Petroleum. But when the latter two join forces in a merger expected to be completed later this year, the combined Phillips/Conoco will become the third-largest U.S. integrated oil and gas company, a leap Wall Street is bound to notice.

At that size, the merged company will have more liquidity and a diversified mix of businesses, including exploration, production, refining and marketing. Analysts figure the combined company could save $750 million each year through merger-related cost cutting. (While we like Phillips too, Conoco (COC: Research, Estimates) is cheaper and pays a higher dividend -- 2.9 percent vs. Phillips' 2.6 percent.)

As with Comcast, described above, Conoco's stock price does not yet reflect the potential of the merger. The reason? Conoco took a hit when poorly performing hedging investments dragged first-quarter earnings of $104 million below expectations. Operating results, however, were in line with expectations, and analysts note that the first quarter was an anomaly at a company that had made money on such investments in the previous three quarters.

The result: Conoco shares are trading at an attractive 14.6 times earnings, or at more than a 20 percent discount to the integrated oil and gas sector.

The deal comes at a time when the ongoing crisis in the Middle East is boosting energy prices -- and energy industry profits. In addition, as the economy recovers, thirst for energy should rise. Already, demand for gasoline is up 4 percent this year, and analysts project that demand for natural gas will likely rise 2 to 3 percent.

"I like energy stocks now as a hedge against what's going on in the world," says Dave Williams, manager of Excelsior Value & Restructuring fund, which owns almost a million shares of Conoco.

No question, FleetBoston Financial is a mess right now. The bank has a history of acquisitions that haven't worked as planned, and its record of customer service has been poor. Problems abound -- from its money-losing Robertson Stephens brokerage to losses in Argentina to recent revelations that it was among a ring of banks defrauded by a metals scam.

All told, earnings plummeted 76 percent last year, to just $931 million, while revenue slid 27 percent to $12.8 billion as Fleet (FBF: Research, Estimates) reported a jumbo fourth-quarter loss. Its recent market value of $37 billion is 24 percent off its peak, and many of Wall Street's often bullish analysts are steering clear.

"That's why Fleet is a 'big ugly,'" says Jim Schmidt, manager of the John Hancock Financial Industries fund, which has been buying shares of Fleet and other troubled large banks. "That's what gives you a buying opportunity."

Under new chief executive Chad Gifford, the former CEO of BankBoston, Fleet now wants to slim down -- and fix up. It has announced plans to unload troubled divisions like Robertson Stephens while spending millions to fix customer service problems. In the first quarter, Fleet reported improved profits of $735 million vs. $142 million in the same period a year earlier.

Gifford also told shareholders that customer attrition was declining along with waiting times at the bank. Wall Street forecasts call for earnings to stabilize this year, rising 100 percent off last year's depressed base, and to climb 14 percent in 2003.

If Fleet can fix what ails it, its big advantage is its footprint in key high-net-worth markets like Boston and the suburban New York markets of New Jersey and Connecticut. With 5.5 million customers and more than 1,500 branches, it's the largest retail bank in New England and New Jersey. And Fleet may well become takeover bait for a megafirm like Citigroup.

For now, the stock is available on the cheap -- just 11 times this year's forecasted earnings vs. 15 times earnings for the average large bank. Assuming moderate earnings growth, Hancock's Schmidt (who works in Fleet's home turf of Boston) figures Fleet's stock could reach the high $40s from $33 today -- a pop of more than one-third. Meanwhile, the stock pays a dividend of 4.3 percent, far above the market's average of 1.4 percent.

Poor Target. At almost seven times its size, Wal-Mart gets all the attention. Certainly the king of retailers has churned out better numbers on most measures, from sales per square foot to same-store sales. But Target -- with trendier products and a smaller base off which to grow -- is no slouch. Its profits rose 12 percent last year to $1.4 billion on an 8 percent increase in revenue to $40 billion.

Helped by the bankruptcy of competitor Kmart and an improving retail environment (as demonstrated by the outstanding first quarter it recently reported), Target (TGT: Research, Estimates) is expected to increase earnings 15 percent this year and another 15 percent in 2003.

The Target stores themselves --1,081 sites and rapidly growing -- have become something of a phenomenon, offering top brands like Calphalon (pots and pans) and Mossimo (apparel) without top prices. But Target's stock has been held back because the company operates more than just Target; it also owns department store chain Marshall Field's and middle-market discounter Mervyn's, and those divisions have been struggling.

But we think that focusing on the troubles of those two smaller divisions misses the point, just as emphasizing not-so-hot Sam's Club would be a mistake when evaluating Wal-Mart: The Target division accounts for the bulk of the company's revenue (82 percent last year) and pretax profits (86 percent), and those percentages have been rising steadily over time. The company plans to spend as much as $3.5 billion this year on capital expansion, opening some 95 new stores, including at least 30 Super Targets.

At a recent $38, Target stock now goes for 21 times this year's forecasted earnings, a discount not just to Wal-Mart (at 33 times) but to Costco Wholesale (28 times) and even Family Dollar Stores (29 times). Savvy investors have started buying: In recent months, MONEY 100 funds Vanguard Primecap and Brandywine have been snapping up shares. We can certainly see why.