BOSTON (TheStreet) -- Americans have pulled almost $100 billion from equity mutual funds this year and put money in bonds and cash accounts to escape one of the most frightening years for investing.
Some fund managers, meanwhile, are shadowing their benchmark indices, hoping to hold on to their jobs amid record volatility in the stock market. And it seems like every talking head is pushing large-cap dividend shares for safety.
Not Sam Dedio.
"I'm paid to invest in the best stocks," says Dedio, head of U.S. equities at Artio Global Management. "We have vehicles for people who want to be exposed to equities. If they want to be exposed, they pay us to be exposed to equities without market timing. I have a very strong opinion on that. I don't believe in holding a lot of cash. If you don't want to be invested in the equity fund, you'll redeem your shares."
Dedio heads up several of Artio's investing strategies, including the
Artio U.S. Multi-Cap Fund
Artio U.S. Small-Cap Fund
Artio U.S. Micro-Cap Fund
Dedio and his team have had good success, with annualized returns for the funds ranging from 2.6% and 6.3% since all four funds' inception in July 2006. Most investors aren't committed to owning a true diversified portfolio, which has helped fuel his success, the manager says.
"You have to be comfortable in your own skin with those principles," Dedio says. "When things go against you, you can't overreact and get involved in the dangerous game of market timing. I'd rather be diversified across sectors. You want to own companies of all sizes. We don't like to make a big bet on size."
With the European debt crisis still raging and questions swirling about how equities will react to an eventual bailout, investors who haven't cashed out of stocks have been tempted to time the market. That's a mistake, Dedio says.
"It's a slow-motion, knife-catching exercise," he says. "If it's that easy, why aren't more people outperforming over the long haul? That's consistent with the short-term investment philosophy. Part of risk management is saying, we're in a tough period, so we roll up our sleeves and do our best work to come up with stocks that are undervalued or misunderstood."
While he advises investors to consider all market values, Dedio says many avoid microcaps because of heightened volatility. According to the
Center for Research in Security Prices
, microcaps outperform small caps and large-caps stocks over time, although returns deviate by wider degrees.
Dedio offers up
that are owned in his funds, which are detailed below and on the following pages.
Las Vegas Sands
: Las Vegas Sands is a developer of casino and entertainment resorts. The company has properties on the Las Vegas Strip as well as Macau.
: $43.12 (Dec. 8)
: minus 6.2%
: $31.9 billion
: Because of Las Vegas Sands' exposure to China through its gaming operations in Macau, Dedio says this stock pick is a demographics play. He points out that the company's non-U.S. revenue outpaces the revenue generated from the Vegas properties.
When you look at their real-estate exposure -- where they have properties and where their gaming revenue is coming from -- there is an emergence of a middle class in China," Dedio says. "I really do believe that a population greater than the population of the entire U.S. will become the middle class in China over the next six or eight years."
: Teavana is a specialty-tea retailer with more than 150 standalone stores in the U.S.
: $17 (Dec. 8)
: minus 39%
: $625 million
: This microcap stock is a name most people don't even know, Dedio says, but he is imagining explosive growth for Teavana.
"They have about 150 standalone stores in the U.S. now and we think that number could be 400 to 500, and that's before international expansion," Dedio says. "The truth is more people in the world drink tea than coffee."
Dedio says Teavana can see the same type of success that
Green Mountain Coffee Roasters
has will changing people's behavior when it comes to brewing beverages at home.
"If they execute their growth plan, they have the potential for high margins," Dedio says. "You could paint a picture where the revenue is double or triple in five to seven years. The stock price should give you, with those numbers, outperformance."
Teavana isn't the only microcap holding in Dedio's funds that he thinks has a bright outlook in 2012. He also highlights investments in
, a conservative regional bank based in Delaware is gaining share due to acquisitions.
He's also a holder of
, a Connecticut-based commercial printer that trades for two times next year's free cash flow because investors are "afraid they will not be able to refinance senior debt obligations," Dedio says. "We think they will."
Meanwhile, Dedio sees opportunity in two microcap chipmakers:
Integrated Silicon Solutions
. The former, Dedio says, trades at only eight times 2012 estimates with a 20% net cash position relative to its stock price. The latter, Dedio says, impressed him with sales of chips to larger networking-equipment manufacturers.
: Akamai Technologies handles more than 1 trillion Internet interactions a day, helping companies by using more than 100,000 servers to ensure performance, instant scalability and security.
: $27.25 (Dec. 8)
: minus 42%
: $4.9 billion
: Dedio's investment thesis is based on the simple idea that Akamai is a company providing a service a lot of companies like to use.
"With Akamai, the market from time to time has gotten upset about pricing pressures," he says, noting the precipitous drop in share price this year.
"But if you look at the cash on the balance sheet and the valuation next to cash, this is not a terribly expensive stock," Dedio continues. "We want to be exposed to what they're doing. They're way ahead of their competitors."
: Goldman Sachs is among the world's largest investment banking and securities firms.
: $100.03 (Dec. 8)
: minus 40.5%
: $49.3 billion
: Bank stocks have been a horrendous bet this year for investors. Despite the slide in Goldman Sachs shares this year, Dedio sees plenty of opportunity.
"It's among the best-run banks out there," Dedio says. "They're going to capitalize on a lot of the turmoil. With the management pressures that are ongoing at their competitors, I think they're the best-positioned bank to take advantage of that."
Dedio says his return expectations for banks overall are lower because the capital requirements are higher. He says that will slow the return on equity for many of these banks. However, he argues that most investors are expecting a doomsday scenario and that the situation won't be as dire.
For that reason, Dedio is also a holder of
, which he calls "a very well-run bank compared to its peer group."
Dedio argues that Wells Fargo has moved fast and hard at its capital levels, consolidation and integration. "In this environment where short gains are the only path to growth, they're best positioned," he says.
: Praxair is a worldwide provider of industrial gases.
: $103.14 (Dec. 8)
: plus 8%
: $30.9 billion
: There are only three publicly traded industrial gas companies in the U.S. for investors.
Praxair is more about large installation atmospheric gas creation, Dedio says, which it makes it a natural first look for investors. He says rival
is potentially worth owning, especially after the company's management rebuffed a takeover bid.
"We really like this company because this whole space is an oligopoly," he says of Airgas. "Businesses can't survive without them. Airgas is one I liken to Coca-Cola and their distribution network with trucks and filling real-time retail locations with Coke. Airgas does the same thing with their network."
>>To see these stocks in action, visit the
portfolio on Stockpickr.
-- Written by Robert Holmes in Boston
>To contact the writer of this article, click here:
>To follow Robert Holmes on Twitter, go to
>To submit a news tip, send an email to:
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.