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Analyst: Focus On Smaller, Cyclical Stocks

What do homebuilding, footwear and computer hardware stocks have in common? They're all good value plays, says Craig Callahan, president of ICON Advisors. He was on “Squawk on the Street” to talk with Mark Haines and Erin Burnett about his picks. ICON predicts steady growth for some companies in these areas.

Sounds like an off combination, but Callahan says there’s a common thread between them. The focus from 2003 to early 2006 has been on smaller, cyclical, industrial – even commodity-based – stocks that average about 13% to 15% per year growth. Nike and Stride Rite are good buys, he says.

Callahan doesn’t see a boost in store for the housing market – at least not based on economic data. Rather, companies in this sector were discounted below fair value because of Fed rate tightenings. A correction is likely, making the industry safe for new investments.