Recovery Investing: Stocks That Are Likely to Outperform From Here

With some data now emerging that suggest stabilization in the macroeconomic picture, investors are increasingly interested in finding the stocks and sectors that will outperform when a broad recovery from this deep recession finally arrives.

We thought it would be helpful, therefore, to convene a virtual roundtable with four fund managers to discuss (1) how the brighter macro picture impacts their methodology for stock selection, and (2) what specific stocks or ETFs their methods yield as top opportunities at this time. We published part 1 yesterday - here's part 2.

Participants:

Jeffrey Miller, PhD - President and Portfolio Manager at Chicago based New Arc Investments LLC

Sean Hannon, CFA, CFP - President of EPIC Advisors, LLC

Dr. Charles Lieberman - Chief Investment Officer for Advisors Capital Management LLC

David Hartzell - President and CEO of Buffalo, New York-based Cornell Capital Management

Mick Weinstein, Editor in Chief of Seeking Alpha

Part 2: Stock/ETF picks - What specific stocks or ETFs does this method yield as top opportunities for you?

Hartzell: We buy stocks for two reasons: either they have the capacity to grow over a 1/5/10 year cycle, or they pay a hefty dividend.Or, if we are lucky, both! An example of a growth stock we are buying is Medco Health Solutions (MHS). Examples of dividend stocks we like are Buckeye Partners (BPL), Diamond Offshore (DO) and Surburban Propane (SPH). All are solid companies, with dividends over 7%.

Weinstein: Dave, what in particular do you like in Medco as a growth stock now?

Hartzell: Although Medco (MHS) had a big run up 2009 (up over 65%) we feel it still has room to grow. Medco benefits by selling both brand name and generic drugs, so it profits no matter what the pharmacy companies decide to sell or the general public decides to buy. Medco is the nation’s largest pharmacy benefit manager, and has expanded worldwide. It has a solid balance sheet w/ cash reserves of about 2B, and continues to repurchase stock.While MHS is at $62 today (2/23) we see rising to $80-90 by 2014.