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Five-Star Manager:  Small Caps Offer Big Potential

Has the day of the small-cap stock dawned at last? Jonathan Vyorst, Paradigm Funds co-portfolio manager, thinks so, and he has a couple of recommendations.

His five-star Paradigm Value Fund is up an average of 24.6 percent per year over the last five years.

"What we are seeing is a tremendous number of names that are becoming very reasonably priced," he told CNBC.

"From the point of view of a money manager or...an investor, if you have more than a one-year time horizon, there are some great opportunities right now."

Vyorst likes retailer Phillips van Heusen.

"They own the Calvin Klein brand, as well as Bass, Geoffrey Beene, Izod, van Heusen and Arrow shirt brands," he said.

"The stock trades for only 10 times earnings, and Calvin Klein is really the growth opportunity with this company...Right now, people are terrified to own retailers, and that's a great opportunity for investors."

He also recommends MFA Mortgage , a REIT whose stock was badly battered by the collapses of Carlyle Capital and Bear Stearns.

"It only invests in Fannie Maes and Freddie Macs," he explained. "We've had a big problem in the mortgage market recently, but the reality is, Fannie Maes and Freddie Macs carry an implicit guarantee by the U.S. government, so here's a company now that's selling for just under seven dollars a share that's going to be able to distribute about 90 cents in dividends this year."

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