(MONEY Magazine) – THIS MONTH: --Three small stocks that could provide a bull market ride --The next Prozac: A new drug should make Eli Lilly smile. --With gold so hot, some see a meltdown.

ONE OF THE GOLDEN RULES OF investing is to buy just ahead of the crowd. That assumes, of course, that you know where the crowd is headed. Right now, a sizable group of sharp Wall Street contrarians believes it's time to move into one of the market's most unloved groups: cyclical stocks, which rise and fall with economic cycles. The contrarians say that economic growth isn't as tepid as many forecasters, including MONEY's own Michael Sivy, are suggesting. Furthermore, they expect it to pick up later this year, thereby lifting the fortunes of the downtrodden cyclicals. Byron Wien, chief portfolio strategist at Morgan Stanley, says flatly: "The consensus forecast on the economy is too gloomy."

If you agree, there's still the problem of identifying specific bargain-priced stocks. Some muscular smokestack companies as well as big consumer stocks like depart ment stores look promising. The reason: They appear to be kicking their economic codependence and propelling growth instead by cutting costs, boosting productivity and redesigning product lines. Says A. Marshall Acuff, investment strategist at Smith Barney: "We're looking for companies where the troughs become less pronounced each economic cycle." Example: General Motors. Last year, when U.S. auto sales fell 2.1%, GM still managed to boost revenues 9% and increase profits an even more impressive 41%, thanks to redesigning its products to use more interchangeable and thus cheaper parts.

We asked more than two dozen analysts to recommend the best cyclical stocks to own now, and then winnowed down their choices to the five top companies that follow. All five outfits benefit from dynamic top managements focused on running their companies at maximum efficiency. And each is trading at a substantial discount to the market's estimated price/earnings ratio of 15.3. Each is also endorsed by at least three analysts and listed on the New York Stock Exchange. The stocks are described here in descending order of their projected 12-month returns, ranging from 48% to 13%.

--Owens Corning (ticker symbol: OCF; recently traded at $40.50; no yield). Best known for its pink Fiberglas insulation products, $3.9 billion Owens Corning also makes glass and plastic composite materials used in products ranging from skis to stealth bombers. Since Glen Hiner became CEO in 1992, the Toledo-based company has stripped costs and lifted productivity dramatically. Result: 16 straight quarters of higher profits. Although Owens Corning shares jumped 21% in the past year, Merrill Lynch analyst Jonathan Goldfarb believes the stock remains cheap at nine times estimated 1996 earnings. "That's too low a valuation for the leader of the dynamic, global composites industry that is in the midst of a period of exceptional earnings and profitability improvement," he says.

Two clouds hang over Owens Corning: a lackluster housing market and a potential multimillion-dollar liability for asbestos insulation products that it stopped making in 1972. The suits continue, and the company has earmarked $1.14 billion to cover any future claims. Goldfarb believes that may not be enough, but any extra claims would be "easily manageable." As for housing, Matt Finn, manager of the $35 million Advantus Cornerstone Fund, which owns 41,000 Owens Corning shares purchased at an average of $38 a share, expects home building to revive later this year, thanks to low mortgage rates. He forecasts 14% average annual earnings growth over the next five years, boosting the shares to $60 within 12 months, for a 48% gain.

--General Motors (GM; $52.50; 3.1% yield). "General Motors has traditionally been a big, ugly cyclical company," says Chris Davis, who, with his father Shelby, manages the $2.2 billion Davis New York Venture Fund and $1 billion Selected American Shares. Although $170 billion GM is the world's biggest automaker, it is less profitable than rivals Ford and Chrysler. Worse, over the past 15 years, its slice of the North American auto market has shrunk from 48% to 33%. But the Davises, who own 500,000 GM shares bought between $38 to $42 a year ago, are betting on a revved-up GM. Says Chris: "If its new products are successful and GM uses earnings and cash flow in a productive way, the stock could be a real winner." A sign of progress: GM earned a gross profit of $3,217 per vehicle in 1995, vs. $2,570 in 1993.

The company expects to launch eight newly designed vehicles this year to smarten up dowdy nameplates like the Chevrolet Malibu and all its minivans. Joseph Phillippi, an analyst at Lehman Bros., expects the combination of the spiffier styling and today's low car-loan interest rates to boost GM sales by 7% and earnings by 13% this year. Over the next five years, he figures the company's profits will climb 7% to 9% annually from gains in market share and cost cutting. He believes that growth will propel the shares to $67 within 12 months. Add in the 3.1% yield and that's a total return of 31%.

--Federated Department Stores (FD; $31.25; no yield). In our January issue, this department suggested stocks in the out-of-favor retail sector, noting that the industry was consolidating and had underestimated the potential for the survivors. One of these survivors is Federated, the victim of a devastating '80s-style leveraged buy-out that drove it into bankruptcy in 1990. The Cincinnati company had hired Allen Questrom to lead it out of the valley of the shadow in 1992, and since then the merchant has doubled in size by acquiring rivals. Now the nation's largest department store chain with $16 billion in revenues, Federated presides over 444 outlets, including Bloomingdale's and Macy's, which it bought out of bankruptcy in 1994.

Daniel Barry, a Merrill Lynch retail analyst, says Federated is successfully applying to 148-store Macy's the lessons it learned during its own turnaround--specifically, keeping overhead low. For example, Macy's has pared the number of apparel manufacturers it deals with and given more selling space to its most popular brands, like Jones New York and Tommy Hilfiger. "With one of the strongest management teams among department stores, Federated stands to be a major winner in the continuing consolidation in the retail industry," adds Lee Backus, an analyst at Buckingham Research in New York City. He believes Federated will expand earnings at an average 20% clip every year over the next four years. Smith Barney's Acuff expects the shares, which enjoyed a 42% run-up last year, to hit $40 within 12 months for a 28% gain.

--Caterpillar (CAT; $67.50; 2.1% yield). The world's largest maker of earth-moving equipment was at the top of the heap in the 1960s. But the $16.2 billion Peoria, Ill. manufacturer fell on hard times by the '80s, when leaner Japanese rivals dug into its heavy machinery market share with cheaper products. Next, Cat got clawed by the recession, losing $2.8 billion in 1991 and 1992. Since then, however, earnings have marched ever upward as CEO Donald Fites whacked swollen costs, modernized factories and even withstood a brutal 18-month strike in 1994 and 1995. Today Cat is the low-cost producer in the $30 billion global construction-equipment market, capable of producing a tractor in just five days, vs. 25 days in 1991. Last year the company posted record profits of $1.1 billion. Says John Mackin, an analyst at Morgan Stanley: "Caterpillar is very favorably positioned to capitalize on continued growth in worldwide markets."

Another plus, says Smith Barney analyst Tobias Levkovich, is that in 1995 the company generated $1 billion in free cash flow (that is, profits that are not reinvested in the business) and should do the same this year and next. He expects Cat to use this cash to buy back shares--it has already purchased 6.5 million out of a 20-million-share total program--and take other steps to enhance shareholder value. Mackin believes Cat's earnings will grow 14% this year and an average 12% annually over the next five years. Worries about a slowdown in the global economy are, he says, "overblown." He expects the shares to hit $77 within 12 months, for a 16% total return--making this Caterpillar look more like a butterfly.

--Case (CSE; $53.50; 0.4% yield). For years, $4.5 billion Case, North America's second largest farm equipment manufacturer, has had No. 1 Deere in its headlights. Case, spun off from Tenneco in 1994, is getting closer. "This one-time, second-tier manufacturer is now a world-class competitor," observes Steve Colbert, an analyst for Prudential Securities in San Francisco. After losing $1 billion in 1991, Racine, Wis.-based Case has spent the past five years wisely tending its own fields. As a result, gross profit margins expanded to 20% from 15% in the early 1990s, and the company earned $337 million last year.

Case's turnaround timing couldn't be better. With worldwide grain inventories at record lows, demand for U.S. agricultural exports hit records last year and is expected to do the same this year. Case already has 19% of the $10.5 billion U.S. farm equipment market, and it is poised to ride the agricultural revival over the next three to five years. But Jonathon Braatz, an analyst at Fahnestock & Co. in Kansas City, warns that the strong 12% growth (before taxes) that he expects Case to post this year will be partially plowed under by a jump in the company's corporate tax rate to 35% from 19%. What's important, he says, is focusing on the company's operating income, which he sees rising 15.5% on a 6% sales gain. Braatz expects that performance will lift Case shares to $60 within 12 months, for a 13% total return.

All Stock Data As Of March 1