Cleven, portfolio manager of the Touchstone Mid Cap Value Fund ( TCVAX), says he has no doubt investors are in a different market environment now. "In 2009, every stock was inexpensive and investors needed to prioritize between an abundance of opportunities," Cleven says. "Today, investors need to be more selective. The question we ask of every stock is how much of the recovery has already been discounted in the valuation. Although many stocks are fully discounting a recovery, we're still finding compelling undervalued investment ideas." The Touchstone Mid Cap Value Fund has 74 holdings with assets totaling $46.2 million as of Dec. 31, according to the fund's latest fact sheet. About 99% of the portfolio was in equities with most of the allocation devoted to financials and industrials as of Dec. 31. The fund's top holdings include Zions Bancorp ( ZION), Nucor ( NUE) and Fluor ( FLR), according to the latest fact sheet. Although the market has appreciated dramatically from the March 2009 low, Cleven says he is finding buying opportunities particularly in late-cycle stocks. One of the keys to his investment philosophy is to have more upside potential than downside risk. "Downside protection is a critical component of our investment philosophy," Cleven says. "We wait for bad things to happen to good companies. We then employ rigorous fundamental analysis to determine whether or not the negative issue impacting the stock is transitory or the beginning of a negative secular trend." Cleven offers investors two stocks the fund owns that pay dividends and offer downside protection during the wait for the later cycle volumes to improve. The first, Cintas ( CTAS), is the largest domestic uniform rental company. This play is tied to employment, which is beginning to show signs of life in the U.S. "Not surprisingly, the difficult employment environment has weighed on earnings," Cleven says. As volumes slowly improve, incremental margins for Cintas are huge, he says. For example, he says it won't cost Cintas more to load more uniforms on a single truck if a company they service hires more people. "It's pretty much pure profit," he adds. Republic Services ( RSG), which is the second largest player in solid waste management in the U.S., is another of Cleven's late-cycle plays that should also benefit from stronger incremental margins. "Waste volumes are still 20% below pre-recessionary levels. As the economy continues to improve, waste volumes will rebound and drive strong incremental margins," Cleven says. "On our normalized earnings number, we think Republic is worth $39."