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2012 Will be Microsoft's Year

Stocks in this article: WHGLX MSFT BAC JNJ PEP CIT

Shares of Microsoft (MSFT) remained stuck in neutral in 2011 even though the tech giant's earnings boomed. 2012 is a new year, however, and Mark Freeman, portfolio manager for the WHG Large Cap Value Fund (WWLAX), expects investors to finally take notice of the company's profits and push its stock higher.

"We jokingly refer to it as the most attractive consumer staple that's out there, as opposed to a tech company. It's really about the valuation and I think at some point investors are going to realize that," Freeman said.

The $214 million fund, which garners 3 stars from Morningstar (MORN), is up 2.5% over the past year, putting it in the 46th percentile of Morningstar's large cap blend category. Over the past five years, the fund has lost an average of .5% annually, outpacing 58% of its Morningstar rivals.

While Microsoft's shares have spent the year more or less treading water; the same cannot be said for Bank of America's stock which has sunk more than 50% year-to-date. Despite the company's well-known problems, however, Freeman is a fan of the stock saying, "The business right now is priced to fail and we don't think it's going to fail."

Speaking of turnaround stories, Freeman is bullish on business lender CIT (CIT) primarily because of the transformational efforts of its CEO John Thain. "John Thain is paying off their high cost debt. And if they get access to lower cost debt you are going to see a very attractively margined business."

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Pepsi (PEP) is another one of Freeman's bigger holdings. The fund manager says Pepsi is one of the most attractively priced consumer staples companies on the market and that "the level of skepticism over their North American beverage component is overdone." As for rumblings that Pepsi will split its snacks and beverage companies, Freeman simply calls that an attractive option and further reason to own the shares.

Finally, Freeman says Johnson & Johnson (JNJ) has overcome its quality issues and will once again regain its status as a premier American company in 2012. "The earnings growth profile still looks good and it's also nice to have about a 4% dividend yield on a very high quality company."

Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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