Currently, there is much concern over the company's commercial real estate portfolio, which is facing significant losses and keeping earnings depressed and the stock price low. We believe credit losses will broadly ease going forward. Raymond James's earnings potential will become more widely known and reflected in what we believe will be an increasing stock price. What is your top "beneath-the-radar," or "sleeper," stock pick? Guinther: Our favorite sleeper pick is ICF International ( ICFI). The company has a sticky revenue model with the U.S. government as its largest client. ICF International's unique skill set is consistent with the new administration's focus on energy efficiency, green initiatives, infrastructure development, homeland defense and social program expansion. Recent backlog growth was up 33% versus the prior year in the first quarter, suggesting new business opportunities have already begun. The price-to-earnings ratio of 18 through earnings per share of $1.40 is enticing given their solid growth prospects and recurring business model. Free cash flow should be greater than $30 million in 2009, equating to a free cash flow yield of greater than 9%. What is your favorite sector? Guinther: Technology companies continue to garner a greater and greater share of both the enterprise customer and consumer spending. As has been the case for many years, the productivity benefits offered through technology purchases continues to encourage buyers of all types to purchase and upgrade all types of technology. High return-on-investment rates can be had by both personal and corporate decision makers. CyberSource, Ariba ( ARBA), Synaptics, Omniture ( OMTR) and Skyworks Solutions ( SWKS) are some favored technology holdings. What sector or stock would you avoid?
Guinther: We are most cautious of the health care sector. Proposed radical changes by Washington gives us little clarity, and therefore very little confidence that profits will broadly improve for most health care companies as the government mandates cost cuts.