NEW YORK (TheStreet) -- Many companies' fundamentals haven't been living up to their current market valuations. But that doesn't mean there aren't deals to be had.
These companies are "definitely" dividend plays, as they continue to raise their dividends by 5% to 10% a year, he said. They maintain attractive payout ratios, with Johnson & Johnson yielding roughly 2.8% and Pfizer paying a 3.2% dividend yield. Additionally, they have strong balance sheets and impressive free-cash flows.
Investors owning these two stocks will not only benefit from a steady stream of dividends, but also from capital appreciation over the years, Spellman reasoned.
On the M&A front, Spellman says he's just happy these companies are conservative with their deal-making and "haven't done anything stupid with their money."
The companies are quite close in terms of physical location, he explained, so the cost-cutting synergies are very attractive. But beyond that, there are also many revenue synergies for investors to be excited about.
For investors with a longer time horizon, this is an attractive holding, as earnings could really accelerate over the next 18 months.
Zimmer Holdings could possibly generate $9 in earnings per share in 2016. If that's the case, the stock is attractive at current levels, Spellman concluded.