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Top ideas from an ‘ultimate stock picker’

Three relatively cheap stocks are positioned to outpace the market, Chuck Bath of Diamond Hill Investments said Friday.

Bath, who was named to Morningstar's "Ultimate Stock Picker" list, said that he liked Boston Scientific, which was poised to experience growth driven by demographics.

(Read more: Market's 'healing trend' to continue into 2014: Pro)

Particularly, its cardiac rhythm management business, would see increased demand, he said.

"Now that the core cardiology business has stabilized, growth has returned to the company, but the valuation remains inexpensive."

Secondly, Citigroup stock was still trading at a discount to tangible book value, Bath noted. "It's a new company since the financial crisis with a rebuilt balance sheet with earnings that can grow."

On CNBC's "Fast Money," Bath added that he had reduced or eliminated his portfolio's exposure to such names as Hartford but still remained positive on capital-markets players such as Citigroup, Morgan Stanley and JPMorgan, all of which were among his top 10 holdings.

(Read more: Bull sees bright spots beyond jobs report)

Other top 10 holdings included Occidental, Medtronic, AIG, Prudential, United Technologies, Pfizer and Microsoft.

For his third top stock pick, Bath looked to the energy space, where he said he was avoiding large names such as Exxon Mobil and Chevron.

"Those companies have issues surrounding the profitability of the marketing and refining business," he said. "They have no growth in production, and their free cash flow generation is becoming more problematic."

Instead, Bath preferred Cimarex for its "significant growth opportunity in new production."

"While volume growth is problematic for the majors like Exxon and Chevron, companies like Cimarex should have pretty good volume growth," he added.

By CNBC's Bruno J. Navarro. Follow him on Twitter @Bruno_J_Navarro.

CNBC's Katie Young contributed reporting to this article. Follow her on Twitter: @KatieCNBC.

Trader disclosure: On Aug. 2, 2013, the following stocks and commodities mentioned or intended to be mentioned on CNBC's "Fast Money" were owned by the "Fast Money" traders: Enis Tanner is long GS; Enis Tanner is long WMT; Enis Tanner is long UUP; Enis Tanner is long SPY PUTS; Stephen Weiss is long AIG; Stephen Weiss is long ETN; Stephen Weiss is long C; Stephen Weiss is long BAC; Jon Najarian is long AAPL; Jon Najarian is short puts GLD; Jon Najarian is long DIS; Jon Najarian is long LMT; Jon Najarian is long V; Jon Najarian is long TOL; Jon Najarian is long CVC; Jon Najarian is long HUN; Jon Najarian is long MAR; Jon Najarian is long OC; Jon Najarian is long MGM; Simon Baker is long AAPL ; Simon Baker is long WFC; Simon Baker is long SBUX; Simon Baker is long AMZN; Simon Baker is long VIAB; Simon Baker is long LNKD.

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