Fund Managers Covet These Cheap Stocks

Last week's stock market slide was fueled by hedge funds' indiscriminate selling to raise cash.

But as these players rushed to unload anything liquid in their portfolios, some mutual funds have been scooping up the resulting bargains.

"I think most managers have been buyers in this correction," says Larry Puglia, the portfolio manager of the $11 billion T. Rowe Price (TRBCX Quote)Blue Chip Growth Fund (TRBCX). "Earnings growth prospects for many companies are still quite sound, and the valuations have gotten more attractive."

Few mutual fund managers have the leeway to sell all of their holdings and move into cash, so their stock-picking skills really come to the fore during market crises like this. That's particularly true for managers who elect to lighten up on some stocks to make room for others. ...