Fund Managers Covet These Cheap Stocks

The manager has been buying a mix of industrials, technology and consumer staples stocks, including General ElectricGE, MicrosoftMSFT, PepsiCoPEP, Procter & GamblePG and GoogleGOOG. He has also been buying financials, including Goldman SachsGS.

That's right, Goldman Sachs, the investment bank that injected $2 billion into a hedge fund that lost 30% of its value in a week. The company's stock is down more than 20% from its 52-week high, but Puglia believes it will perform well over the next two years.

Financial services companies in general have led the market's selloff as more subprime borrowers find they can't make their mortgage payments. The mortgage lenders who make these loans, the investment banks that repackaged them into securities, and the hedge funds and other investors who buy them have all been hit by a credit crunch as the market struggles to determine what they are worth.

Puglia has unloaded some financial services stocks, but not all. In addition to Goldman Sachs, he also likes American Express AXP, Morgan Stanley MS and Charles Schwab SCHW.

Puglia isn't buying indiscriminately, however. The fund manager has sold energy stocks, and thinks natural resources shares are only now beginning to look cheap.

As of Friday's close, his fund was up 6.8% year to date, outperforming the S&P 500. Over the past three years, it has returned an annualized 11.91%. It doesn't charge a load, or sales commission, and carries an annual expense ration of 0.81%.