To make money in stocks, you need to focus on companies BEFORE everyone else does.

It’s not easy to do… and often times it means buying stocks that are out of favor with the general market.

But while that might make most investors feel uncomfortable, if you can find an undervalued stock flying below Wall Street‘s radar, then there is a chance you can make a lot of money… just ask George Soros or Warren Buffett.

That said, I’ve found one stock most analysts won’t touch. They see this company as an out-of-favor cyclical play, but I see it as a company on the cusp of rotating back into favor…

But before I get into it, let me introduce myself. My name is David Sterman and I’m the chief strategist behind StreetAuthority’s latest premium service — $100,000 Portfolio.

I’ve been in the investing business for two decades now. And after working as a Senior Analyst at Smith Barney, the Managing Editor at TheStreet.com, and the Director of Research at Individual Investor, there is one thing I’ve learned when it comes to investing — the real gains in stocks are made in companies that are misunderstood and mispriced.

That’s why I tend to focus on distressed companies. Not only do undervalued stocks offer a high upside potential, but since they’re typically out of favor, they almost always trade close to what I call “downside support” as well.

Can they fall further? Surely, but not by all that much.

One such company is Alcoa Inc. (NYSE: AA), the U.S. aluminum producer. After falling 80% from its peak in 2007, Alcoa surely qualifies as seemingly distressed.

As the third-largest aluminum producer in the world, Alcoa shares got hammered last year thanks to a plunge in aluminum prices. Staggering global growth, increased production from Chinese smelters and concerns over the European debt crisis all contributed to the price drop.

But selling aluminum is a cyclical business. And while aluminum prices may have sagged in 2011, management is anticipating a turnaround year in 2012.

Alcoa’s CEO Klaus Kleinfeld predicts global aluminum demand will rise 7% this year, compared with 2011 levels. His bullishness largely stems from production plans at Boeing (NYSE: BA) and Airbus, along with auto makers that are using an increasing amount of aluminum in vehicles to save weight.

The company as a whole has an even brighter outlook. They predict 2012 demand for aluminum will exceed supply. If this happens, then aluminum prices could well finish the year closer to $1.10 or even $1.20 a pound. Prices are currently near $0.93. (Alcoa makes money when this figure moves above $1.)

As a testament to this belief, aluminum inventories shrank from $3.2 billion in the third quarter of 2011 to $2.6 billion in the fourth quarter. If the global economy starts to perk up, then these numbers should continue to fall — and Alcoa will be poised to rake in stunning amounts of cash.

Even if the supply-and-demand factors don’t change that quickly this year, the long-term fundamentals are still good. Alcoa should do well in anticipation of this better long-term path.

Action to Take –> Right now could be a good chance to buy Alcoa before the rest of the market shifts its focus to management’s expected long-term bullish outlook. Wall Street tends to wait until business trends are clearly stronger, but you can score big profits by stepping in before this shift in sentiment.

But of course it’s not just enough for a company to be distressed to justify jumping in. After all, most of the time a stock’s poor performance is warranted.

I need to know that the stock I’m buying will be profitable down the road. That’s why I also love companies with clear operating leverage.

As the world’s lowest cost-producer of aluminum, Alcoa definitely has just that. Sure profits are OK now, but they should be explosively higher in a few years as demand for aluminum regains momentum.

Let me warn you though, trying to beat the rest of the market to the punch means you run the risk of showing up to the party early. It may be a while before Alcoa starts to move, but regardless, I have a high degree of confidence its stock price will be higher in a year or two.

And since I can’t tell you exactly when this stock will take off, I may as well get in while it’s certifiably inexpensive.

[Note: If you’re not already following my newest advisory, then I’ll make it easy for you. Simply follow this link to be notified by email each time I publish a new pick or update for my premium advisory, $100,000 Portfolio. This service is absolutely free. We can’t say how long we’ll make this offer, so even if you think you might be interested, then you should take advantage.]