(FORTUNE Magazine) – When Time Warner (TWX, $17) announced this month that it was taking a $500 million charge in anticipation of a settlement with the SEC on issues relating to accounting in its AOL unit, investors couldn't help but wonder: Were the clouds finally beginning to lift over this long-stagnant stock? Too early to know, says Brian C. Rogers, manager of the T. Rowe Price Equity Income fund. Rogers owns 12 million shares of Time Warner (parent of FORTUNE's publisher), which he purchased mostly in 2002 and 2003, when they traded in the $11 to $20 range. But Rogers told us why he thinks TWX may be poised for a comeback.

What attracted you to the stock?

I look for good companies that have been penalized by the market and try to make an intelligent guess as to whether the company can improve its performance--and investor sentiment can simultaneously improve. That was our thesis in Time Warner. With the businesses it owns and its stock slammed, I feel quite comfortable that investors will view the company in a more positive fashion.

What about that pesky SEC investigation?

You have to look at Dick Parsons and conclude that he's a person of great integrity and will do the best he can to straighten out the company's prior difficulties. The $500 million set-aside in the third quarter will hopefully take all that into account.

What is likely to happen to AOL?

AOL is not a bad business. In some ways it's like Blockbuster, where you can see attrition continuing to be an issue, longer term, but it's a decent cash business going forward. I'm an AOL customer, primarily because my kids are glued to it.

You don't think a sale of the unit is inevitable?

Oh, I wouldn't rule anything out. It's conceivable. Then again, if it were one of the five key businesses of Time Warner in five years, that wouldn't surprise me either.

What do you make of Time Warner Cable's push into telephony? You also own shares of Verizon, which is now hoping to sell video services.

I look at my personal telephone preferences--I've been a Verizon customer pretty much my entire life, and I'm not certain why I'd want to change that. I'm worried that companies are going to make these huge capital investments to get into other businesses when maybe they ought to think about alternative use of that capital.

What needs to happen for Time Warner's stock price to rise?

The long-term investment case is one of continued growth in all the core segments; continued strong cash-flow generation; an intelligent handling of the balance sheet in terms of possibly a little bit more deleveraging; but, more important, the intelligent use of free cash flow over the long term. I mean any one of the following options: stock buybacks, a hypothetical future dividend, or intelligent acquisition activity. I think the thing the market will be focused on is, Will Parsons et al. use cash flow in a prudent manner and not overpay for big deals?