Investing in shares that are temporarily out of favour with the market can be a seriously rewarding strategy – when it pays off.

The key to success with this strategy is obviously identifying a company that is in the doghouse temporarily, rather than one in structural decline or facing issues that can’t be addressed.

While some market participants (especially technical analysts) recommend avoiding beaten-up shares at all costs, I think these three shares could be considered as turnaround candidates:

Henderson Group plc (ASX: HGG)

There is no doubt that Henderson is facing some short term challenges following the Brit’s decision to leave the European Union, but the UK-based fund manager remains in a solid position to rebound once market conditions and confidence in the region start to improve. The company continues to grow assets under management, although the depreciation of the Pound continues to be a headwind for Australian investors. Nevertheless, I think Henderson could be a great long term hold at current prices for investors who feel equity markets will continue their march higher over time.

Blackmores Limited (ASX: BKL)

Blackmores is a share that seems to have the market divided after its latest market update, although I think the shares are now entering value territory after their hefty decline that really began at the start of the year. While some analysts are suggesting the decline in first quarter sales could be a sign of bigger things to come, it more likely reflects the temporary shift in supply dynamics as a result of changes to Chinese importation laws. The underlying demand for Blackmores’ products hasn’t really changed and I expect the company to continue on its growth trajectory once supply channels are re-established.

Gateway Lifestyle Group (ASX: GTY)

Gateway Lifestyle disappointed the market with a softer-than-expected full year result and outlook for FY 2017 and this has seen the shares fall by more than 20% since the announcement. Although the company may face some short term pain while it tries to regain investor confidence, I still think it has a bright future as it operates in a growing and attractive segment of the retirement market. Unlike aged care providers, Gateway Lifestyle provides affordable living options in a pleasant community-like setting, without the reliance on ongoing government funding. Interestingly, UBS currently has a buy rating for the shares with a price target of $2.75 – a 25% premium to the current share price.

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Motley Fool contributor Christopher Georges owns shares of Blackmores Limited and Gateway Lifestyle Group. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.