Opportunities in underappreciated mid caps: Fund managers

4-star fund manager: Under appreciated mid-caps

High-quality companies often get trounced almost with the same severity as lower-quality names during market washouts, and that means there are some buying opportunities, especially in mid-cap stocks, portfolio manager Brian Angerame said Tuesday.

"Times like this you want to keep your head," said Angerame, who manages the Morningstar four-star rated ClearBridge Mid Cap Core Fund, with $1.5 billion in assets under management.

While he thinks the market will continue to bounce around, he said there are mispriced mid-cap stocks out there.

"In mid-cap there are always unloved or underappreciated companies," he told CNBC's "Power Lunch."

Angerame typically invests in companies that generate predictable free cash flow, have time-tested management teams and have strong balance sheets. That way they can weather things like a credit crisis, confidence crisis or recession, he said.

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While he's finding opportunities in most sectors like consumer, health care, tech, industrials and materials, he's having a hard time finding attractive stocks in utilities, most financials and staples.

Signet Jewelers, for example, is a "category killer that is still in the process of killing its category," said Angerame.

He also likes Alliance Data Systems and Mednax.

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Meanwhile, Neil Hennessy, manager of the Morningstar five-star rated Hennessy Cornerstone Mid Cap 30 Fund, believes the recent correction has made the bull market healthier.

In fact, he thinks there is a perfect storm coming with the expected interest rate hike by the Federal Reserve. With Treasury yields coming down, he thinks it's a great opportunity for people to get out of fixed income and into the stock market.

"There's a lot of companies that are undervalued out there," Hennessy told "Power Lunch," noting that he still believes the Dow Jones industrial average can hit 20,000 in the next couple of years.

Hennessy specifically likes names such as Foot Locker, Masco and Pilgrim's Pride.

CNBC's Stefanie Kratter and Jennet Chin contributed to this report.

Disclosure: Signet, Alliance Data Systems and Mednex are all owned in the ClearBridge Mid Cap Core Fund. Neil Hennessy owns Foot Locker, Masco and Pilgrim's Pride through mutual funds.