Fund Managers Covet These Cheap Stocks

With the S&P trading at a reasonable 15 times next year's earnings, the fund manager believes this is a good time to look for companies with weak valuations and good growth prospects.

Among his top picks are Cisco CSCO, which was the fund's biggest holding as of June 30, according to Morningstar. The maker of network equipment just reported a favorable quarter and Winslow expects it to be a "major beneficiary of world economic growth," with rising revenue growth and profits climbing 20% a year.

Another pick is pharmacy manager Medco Health SolutionsMHS, which is capitalizing on the trend of generics replacing high-priced proprietary drugs, says Winslow, predicting 20% earnings growth.

The MainStay fund was up 9.6% year to date as of Friday, with a three-year annualized return of 14.22%. It has an expense ratio of 1.4%, and a 5.5% load.

"Everyone is worried about the next shoe to drop, but these periods of volatility give us a chances at stocks that weren't available a couple of months ago," says Russell Croft, co-manager of the $24 million Croft CLVFXValue Fund (CLVFX). "Our goal is to beat the market with reduced risk."

A long-term value-oriented investor, Croft's time horizon is one to three years and he invests in companies of any size in any sector. Right now, he likes industrial adhesive company 3MMMM and timber firm WeyerhaeuserWY.