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Mid-Caps Hold 'Pockets of Strength': Pro

Wednesday, 14 Nov 2012 | 4:21 PM ET

CHICAGO — For investors to navigate their way through the current market minefield, they may actually have to forget a few things.

Daunting problems like Washington's fiscal crisis, slowing global economies and the meager growth in the U.S. all mask opportunities that clever buyers can find, said Brian Lazorishak, senior portfolio manager at Chase Investment Counsel.

"It's been a difficult month or two. There's a real risk" of recession, Lazorishak said during an interview at the Charles Schwab Impact 2012 conference. "Overall, you look at the business climate and there are pockets of strength. For a stock-picking firm like us, that's a real opportunity."

To find those opportunities, Lazorishak recommends investors not become beholden to fear over risks but rather aware of companies that don't have as much exposure to the macro factors hovering over the market. (Read More: Obama: Ending Tax Cuts for Rich Resolves Half of 'Cliff.')

Paramount among those are the "fiscal cliff" of tax increases and spending cuts set to take place in January unless Washington politicians can agree to deficit-reduction measures.

While the market has taken a beating lately because of fears that the economy will go over the cliff, Lazorishak said they instead should be looking for opportunities.

Market's Biggest Bargains?
If you have a 5-year time horizon, Oakmark Fund portfolio manager Bill Nygren says these stocks offer a lot of value.

"What we have going on policy-wise is even more convoluted than usual. Individual investors will say, 'I'm going to go ahead and take gains because of the tax situation next year,'" he said. "You have to recognize what companies that are potentially impacted. It's very hard to handicap how things are going to work out there. But this is a market that will let you find some winners." (Read More: Flight to Safety in Bonds May Actually Mean More Risk: Pro.)

Lazorishak moves mostly in the mid-cap space, which he thinks will do well because "when you look at bigger, broader-based companies exposed to the whole economy, some of those are having a tough time growing. Within certain areas you can find niche players."

Among his recommendations: Polaris Industries, a Minneapolis-based manufacturer that recently recorded blowout third-quarter earnings; Grand Canyon Education, a for-profit educator that also had a solid quarter despite the industry's woes otherwise; and Quanta Services, which has slid since Super Storm Sandy but could be poised for growth while the nation's electrical grid is improved.

"Many people don't realize how well the markets have done," Lazorishak said. "You talk to the average person and it's a doom-and-gloom outlook. What this environment allows for is more expansion."

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