I met recently in New York with the managers of the Quaker Capital Opportunity Fund (QUKTX). The large-cap fund hasn't hit it out of the park the past few years -- its returns are flat so far in 2006 and the fund slightly underperformed the S&P 500 in 2004 and 2005, gaining 16.3% and 9.2% respectively, according to Morningstar.
But fund managers Michael Barron and Charlie Knott have had the fund positioned defensively, given their concerns about the slowing economy and rising interest rates.
I asked them which stocks they like the best right now and was impressed with their picks. The list is made up of solid companies in the food, beverage, consumer staples and drug sectors. A couple are foreign-based firms, which could help cushion them from U.S. turmoil. If, like Barron and Knott, you want to stay in the market but your main goal is preserving your capital, these are six stocks to consider:
PepsiCo Inc. (NYSE: PEP). Recent earnings news has been good and the stock has climbed from $58 to $63.50 in the past three months.
Colgate-Palmolive (NYSE: CL). The stock is up nicely this year, but fell a couple of dollars recently as second-quarter earnings dropped from a year ago due to restructuring charges. Sounds like a near-term opportunity.
Staples Inc. (NASDAQ: SPLS). This stock hit hard times in May, but analysts are positive on it.
Diageo PLC ADS (NYSE: DEO). This liquor maker has done decently all year, but had a nice pop in just the past week.
Sanofi-Aventis ADS (NYSE: SNY). This large drug company has been very volatile this year (this is the riskiest of the bunch, I'd say). But its treatment to battle obesity has huge promise. It reports earnings on Aug. 2 and analysts expect it to earn 78 cents a share.
Cephalon Inc. (NASDAQ: CEPH). Another biotech, this one has drugs for sleep disorders, cancer and pain. It's down year-to-date, but up nicely since late June.