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Fed rate hikes would be positive for these stocks: Pro

An interest rate hike by the Federal Reserve would have a positive impact on mid-cap stocks, portfolio manager David Nicholas told CNBC Wednesday.

If the Fed raises rates, it means the economy is improving.

"If the economy is improving, midcaps … will continue to grow," Nicholas said in an interview with "Closing Bell."

"The valuations there are pretty attractive."

Valeant Pharmaceuticals sign at the company's headquarters in Mississauga, Ontario.
Norm Betts | Bloomberg | Getty Images
Valeant Pharmaceuticals sign at the company's headquarters in Mississauga, Ontario.

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In fact, his mid-cap fund, Nicholas Fund, is beating the Street. It has seen gains of more than 12 percent in the last year, beating its benchmark, the Russell Mid-Cap Growth, which is up about 9 percent.

Nicholas said the mid-cap sector brings the security of companies big enough to complete without the risks of small-cap names.

"Those companies tend to be able to grow but also not be as volatile, if you will, as some of the small-cap stocks," he said.

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The fund's top holdings include health-care names. While Nicholas likes the sector, he said he's more of a stock picker.

He likes Gilead Sciences for its great cash flow and ability to reinvent itself continuously. "They have great momentum right now, and we think that will continue."

Valeant Pharmaceuticals is another name Nicholas likes. He called it a well-managed company that has great opportunities to expand both organically and through acquisitions.

Disclosure: Nicholas owns Gilead Sciences and Valeant Pharmaceuticals.