Stocks That Smart Managers Like Now

These pros use the market’s downdrafts to their advantage.

- John Waggoner

Benjamin Graham, author of The Intelligent Investor, the value-investing bible, likened the stock market to a man with wild mood swings. One day Mr. Market would offer to sell you his business at a ridiculously high price; the next day he’d offer it at a crazy discount.

During market declines, mutual fund managers are paid to look out for fire-sale stocks. Many used the downturn that began last September to snap up new holdings or add to positions they already owned. We asked a few smart bargain hunters to share where they’re finding good values now. (Prices and other data in this story, unless otherwise noted, are through January 11.)

Charles Bobrinskoy, ARIEL FOCUS (SYMBOL AFOYX) Cheap stocks are the “silver lining” in a bleak market, says Bobrinskoy, especially because investors’ worries about the economy now appear overblown. “We’re seeing data saying that not only was the jobs situation not bad, it was great,” he says.

One favorite that Bobrinskoy is buying more of: BORGWARNER, a leading manufacturer of powertrains and turbochargers for the automotive industry. The company is best known for products that improve fuel efficiency and lower carbon emissions. But the firm is also a leader in electric vehicle powertrains and, in fact, it “makes more money from electric vehicles than gas-powered ones,” Bobrinskoy says.

Bobrinskoy also favors alternative-asset managers, particularly