Forget About the Fed, Focus on Stock Picks

It is possible, believe it or not, to make money in stocks without obsessing about the Fed's next rate decision or the upcoming employment report.

"We don't tune out the Fed entirely," says Matthew Kaufler, portfolio manager for the Touchstone Value Opportunities fund. "It's just not a priority for us." Kaufler and his co-managers use a bottom up method for selecting stocks, focusing on a company's ability to generate and sustain a high level of cash flow.

From a shareholder's perspective, Kaufler's priorities seem to be very much in order. The $112 million fund is up 8% year to date, 2.5 percentage points better than the S&P 500. The fund has returned an average of 16% annually over the past five years, a hefty 4.6 percentage points better than the index.

Value Manager Scoops Up Shaw Group

That's not to say that the fund's managers run away upon first sight of Fed Chairman Ben Bernanke. They have, in fact, "poked our heads up now and then" with great success.

"If we see a contrary sign flashing red then we know we need to act. For example, we began underweighting financials 18 months ago because we believed that the credit cycle would roll over," says Kaufler. "We may have been early, but it ended up being the right move."

Another prescient move was the fund's decision to invest in infrastructure stocks like the Shaw Group(SGR Quote).