BOSTON (TheStreet) -- Hot gadget maker Apple (AAPL) and filtration company Polycore (PPO) are favorite stocks of market strategist and technical analyst Gene Peroni Jr., who favors growth over value even as the economy is stuck in a rut.
Peroni, whose father pioneered the "Peroni Method" of selecting stocks using a technical perspective over 50 years ago, says he follows charts and valuation, as well as money flows and relative strength, to find stocks where there is sustainability of a trend.
"In times like these, we are ambushed daily by these headline news events. Technical analysis lets us get a clearer interpretation of the real market condition," says Peroni, who works for Conshohocken, Pa.-based Advisors Asset Management, a firm with $7.3 billion in client assets. "When the trends diverge from the daily headline news, it can be very exciting."Peroni says the divergences he is witnessing now are bullish for stocks, and that the underlying tone of the equity market is improving relative to the volatility, which has been spurred by the growing debt crisis both domestically and in Europe and a weakening global economy. It seems not a day passes without some drama involving the potential of a Greek default or rescue, and that increased uncertainty has led to wild swings in equity prices. "The market never likes uncertainty and it's faced with plenty of uncertainty now," Peroni says. "Through it all, the market's internal behavior is improving even in the thick of the very unstable events globally. I think we're closing in on some sort of a bottom here. So much of the bad news is on the table and, to some degree, digested by the market." While large-cap, dividend-paying stocks have been the defensive go-to for investors hungry for yield and looking for protection, Peroni says there has been a migration from the perceived safety plays from large-caps to quality mid-cap stocks, many of which offer more earnings growth leverage. "The biggest trend we're seeing is that growth is winning out substantially over value," he says. "That is very encouraging. This market is much more balanced in terms of its leadership. It's uniquely broad-based. This market continues to be populated by different and diverse sectors." As proof, Peroni points out that a defensive consumer-staple stock like Colgate-Palmolive (CL) is making new record highs at the same time a rocket stock like fertilizer company CF Industries (CF) is also reaching all-time highs. "It's a very exciting environment, and it's one where many investors remain largely absent," Peroni says. "Investors might be doing themselves a disservice by not regarding growth as part of their overall equity allocation." Peroni offers up several growth stocks he has come across using the methodology his father pioneered more than half a century ago. Peroni says these stocks are in portfolios of his clients and have both short-term appeal based on technical factors but also have good long-term potential. "These are stocks that we feel strongly about not for a trade but to hold for the long haul," he says. The following pages detail five stocks Peroni is currently favoring in this market environment.
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