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Halftime: Top Hedgie’s 2 Favorite Stocks for Year's End

Value investor Whitney Tilson on Thursday shared his best stock picks for the fourth quarter:

BP

Tilson, founder and managing partner of T2 Partners, said he's sticking with BP. Roughly a month and a half after the Gulf oil spill, which put the London-based company on the defensive, Tilson said the stock was simply "too cheap" to pass up. A few weeks ago, Tilson said he bought even more shares of BP when it dropped to $34.

Like Tilson expected, BP's incoming CEO Bob Dudley said Thursday he hopes to reinstate dividend payments next year. Based off BP's current share price, Tilson thinks the dividend yield could be near 8.6 percent.

Automatic Data Processing

Tilson called ADP "one of the world's great businesses" and noted it's 4.5 times larger than their nearest competitor. The Roseland, N.J.-based payroll company has very high switching costs for customers, generates 20 percent operating margins and a 25 percent unlevered return on equities, he said. He also praised the company's management.

The problem with ADP, he said, is that it's "great growth story is stalled out." Growth is flat, making this stock more expensive. Tilson is willing to pay up for ADP, however, because he thinks there are several short-term macroeconomic factors that are weighing on it. Among these, he said, is low interest rates and unemployment. He thinks ADP is a good long-term play because interest rates will eventually return to 4 percent and businesses will start to hire.

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CHART OF THE QUARTER

As the third quarter comes to a close, the 2-Year Treasury Note fell to 0.43 percent, which is the lowest level on record.

Veracruz founder Steve Cortes said he likes Treasurys. If they close up Thursday, he will add to his long position in Treasurys.

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CALL TO THE FLOOR: ADTRAN

ADTRAN is a Huntsville, Ala.-based company that provides voice, data, video and Internet communications.

To talk about what's next for the technology name, CEO Thomas Stanton made an appearance on Thursday's "Fast Money Halftime Report."

Watch the video to see how it went.

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CALL THE CLOSE

"The drumbeat of bad news out of Europe is intensifying," Steve Cortes, founder of Veracruz. "I want to sell European assets."

Jon Najarian, co-founder of optionMONSTER.com, likes the bounce the markets experienced Thursday and thinks it could continue. He doesn't, however, think the markets will go back into the black.

Stuart Frankel's Steve Grasso thinks the markets could push higher thanks to an increase in Chinese manufacturing activity.

So long as the S&P 500 Index stays above the 1,135 level, Guy Adami of Drakon Capital also thinks the market could push higher. If the market dips below that level, however, he would sell.

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Trader disclosure: On Sept. 30, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Cortes owns U.S. Treasuries; Cortes is short the Euro; Cortes is short the Mexican Peso; Cortes is short (XLF); Cortes is short (BAC); Cortes is short (LVS); Cortes is short corn; Jon Najarian owns (BA) call spread; Jon Najarian owns (DB) & short calls; Jon Najarian owns (AEO) & short calls; Jon Najarian owns (MKC) & short calls; Grasso owns (ASTM), (BA), (BAC), (C), (CSCO), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST)

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (AMGN)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HPQ)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own (RDC)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)

For Whitney Tilson
Funds Managed By Whitney Tilson Own (BP), (MSFT), (BRK.A), (BRK.B), (JNJ), (ADP)

CNBC.com with wires.

Symbol
Price
 
Change
%Change
ADP
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ADTN
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BP.
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AMD
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BRK.A
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KO
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MCD
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