Dan Veru expects big things from small caps. The executive vice president and co-chief investment officer of Palisade Capital Management says that as the market begins to rebuild confidence, investors will be looking to take on more risk in their portfolios, with small-cap stocks leading the way.
"A frequent mistake people make in periods like this is to focus on large-cap stocks," he told CNBC.
So what stocks is Veru naming?
"While we're avoiding financials generally, I like...Raymond James Financial, because they don't take the kind of risk that the other banks and brokers have taken," he said. "They are a transaction-oriented company; they don't use their balance sheet to take principal risk in anything."
He also likes Baldor Electric, a manufacturer of electric motors.
"They acquired...the electric-motors business...from Rockwell International, and it's a very exciting growth opportunity for them," he said.
Veru's third choice is Genesee & Wyoming , which operates short-line and regional railroads in the United States, Canada, Australia and the Netherlands.