Here are last night’ stock picks from Robert Costomiris. He's a senior portfolio manager at Wells Fargo, where he manages the five-star Morningstar-rated Wells Fargo Advantage Mid Cap Discipline Fund (SMCDX). He’s up an exceptional 13.2 percent year to date—that’s an impressive 400 basis points above the S&P.Mr. Costomiris believes the trick for this market is to go where other people aren't going. He looks for the “untold stories” and buys high-quality companies that are out of favor with analysts.
His picks:
Kroger (KR): “The first untold story is Kroger. It's obviously the largest grocer in the country. 40 percent of consumers have to shop there week after week, regardless of the economy. They've got the best management in the industry. How do we know this? They obsess about long-term competitive sustainable advantage. They reinvest in the business.”
Hanover Compressor (HC): “One of the best-performing energy companies in the last year. [It’s overlooked] because it's boring. What they do is they lease compression equipment to natural gas pipelines. Very steady-eddy business. They redeploy capital into faster growing geographies.”
Ohio Casualty (OCAS): “It’s a financial company—obviously a Midwest property and casualty insurer. Just went through an arduous but successful three-year turnaround. And the Street is assigning it a 10 PE.”
Pall Corp (PLL): “This is an industrial company, but not your father's industrial company. 75 percent of its sales are replacement filters to manufacturing companies worldwide. They sell filters to manufacturing companies that filter air, gas, liquids, water, etc. Very steady-eddy, high returning, free cash flow story.”
Millipore (MIL): “This is a sneaky biotechnology play. Millipore owns the technology to sell consumables in a monocotyl antibody-derived drug manufacturing and biotechnology. They hired a new CEO in the last year and a half to take the company to a new level. He's cutting costs and redeploying assets into faster-growing strategic opportunities, including smart acquisitions. The nice thing about this is that they are diverse companies, so they're selling into the Genentech. They're selling into all the big biotechnology companies. They're not dependent on one drug. Their single biggest drug is probably one of Genentech's big drugs, and it's about 3 percent of sales.”
