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5-Star Small-Cap Stocks

How does a five-star fund manager play this volatile market? Mark Keeley of Keeley Asset Management does it with health care and energy stocks.

His five-star Keeley Small Cap Value Fund is up an average of 19.66 percent per year over the last five years, and even shows a gain of nearly 3 percent year-to-date.

"We're looking for undervalued stocks, and that takes us across all market caps and industries," he told CNBC. "We're best known for our work in the small-cap space, and we're still finding value in this market."

Recommendations:

Among the names in which he's finding value is Pharmerica.

"Pharmerica was spun off last year from Amerisource Bergen," he said. "It's a pharmaceutical outsourcing company...it's definitely a good place to be, and a good way to participate in the changing demographics as it relates to health care."

(What do Shorts say about Pharmerica? Click to find out.)

He also likes Hill-Rom Holdings, a spin-off from Hillenbrand Industries that makes beds and furniture for hospitals.

"They are definitely a vertically-integrated company, as along as you stayed horizontal," he joked. "We see tremendous opportunity in the hospital-bed business."

Continuing on the "horizontal" theme, Keeley likes Superior Well Services, which specializes in the field of horizontal oil-well drilling.

"Horizontal drilling, or pressure drilling...takes older wells, or properties, and using this technology, you can increase your yield, and squeeze a little bit more out of these existing wells," he explained. "With triple-digit oil prices, this technology really makes sense."

Disclosures:

Disclosure information for Mark Keeley was not immediately available.

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