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Buffett likes papers, and I do too: 5-star manager

Stocks in media, insurance, and biotech are among the eclectic mix of names favored by Bill Smead, CEO and chief investment officer at Smead Capital Management.

The 5-star fund manager gave three picks—one in each sector that he owns—in an appearance Monday on CNBC.

The first stock Smead likes is Gannett, which has had a tough year so far, off more than 11 percent.

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Gannett
Jay Carrier | Bloomberg | Getty Images
Gannett

"It's not the same newspaper company people thought of. First of all, the 84 dailies are very much Warren Buffett's kind of community newspapers," said Smead—referring to Buffett's appetite for scooping up newspapers in small and medium-sized towns.

Besides the newspapers, auto dealers and retailers will also be advertising on Gannett's "40 network-affiliated television stations," he said in a "Squawk Box" interview.

Last month, Berkshire Hathaway made a play to directly own a television station—picking up ABC affiliate WPLG in Miami from Graham Holdings, which holds the remaining assets of The Washington Post after that paper's sale to Amazon chief Jeff Bezos for $250 million in August.

Read MoreBuffett's Berkshire gets its first TV station

Citing that TV deal as a reason to like a media company such as Gannett—which also owns USA Today—Smead said: "It makes us feel awfully good. Warren likes the TV station and Warren likes the community newspapers."

Chris Rank | Bloomberg | Getty Images

For his second stock, Smead chose Aflac, on the idea that the insurer will play a key role in the changing health-care landscape.

"Aflac will be a huge beneficiary of the effort on the part of companies like IBM and Walgreen to go to the employees and give them the money and send them to private exchanges."

The move to private exchanges will drive deductibles higher as people look to save on their monthly payments, he said. But Aflac could provide low-cost policies, "maybe $20 or $30 a month, to fill that hole in the deductible."

So far this year, Aflac's stock is more than 7 percent lower.

Amgen offices in Fremont, Calif.
AP
Amgen offices in Fremont, Calif.

Smead's third name is biotech firm Amgen, which has had a rough few weeks, losing more than 6 percent in last week's momentum stock slide alone.

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"The recent correction … is healthy to get the froth out of the market," he said. "They are throwing out babies with bathwater. Amgen trades at, say, 14 to 15 times earnings." It's "gushing cash flow," spending 20 percent on research and development, raising dividends and buying back stock, he contended.

Investors are treating Amgen like a high-flying 60 times-earnings stock, which it is not, said Smead, whose firm has $893 milllion under management.

—By CNBC's Matthew J. Belvedere.

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