Don’t Judge Too Quickly

Derek Batts' picks may have a way to go, but he still believes

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Derek Batts, president of Detroit-based Union Heritage Capital Management, revels in finding equities that sell at a discount but possess the potential to outperform the market. “We’re buying everything we told you about last year,” says the confident Detroit University alumnus, who manages $200 million for such clients as the city of Detroit Police and Firemen Retirement Account, and the State of Ohio Bureau of Workers’ Compensation.

Due to the precipitous fall of the market since last year, Batts’ Private Screening picks did poorly, losing 37.1%, mostly due to the troubles of former tech titan Cisco Systems. Batts insists his choices continue to be “undervalued and favorably priced.”

The first of his picks, New York-based Bristol-Myers Squibb Co. (NYSE: BMY) wound up losing 6.72% for investors. It relies on staples, such as headache medicine Excedrin and the Clairol hair-enhancement product line, to turn a profit. It’s also succeeding in the pharmaceutical arena, battling cancer, cholesterol, and heart disease. Batts still recommends this play to his clients. The stock was selling at $55.56, and could hit $65 by next Christmas.

Cisco Systems Inc. (NASDAQ: CSCO) was part of the “tech wreck” of 2000-2001. This San Jose, California-based firm, which once sold for $75, was selling for $12.18 a share in September. According to Batts, it’s a “hold” for his long-term investors awaiting a rebound, but he isn’t buying it for his new clients. Some pundits insist it could reach $23 next year.

The demand for scales and other precision instruments enabled investors in Mettler-Toledo International Inc. (NYSE: MTD) to lose just 0.71%. Batts appears quite smart to have tabbed this Switzerland-based firm at $42, since it’s barely lost a dollar all year and remains a “buy.” Experts anticipate the stock will move up to $54 soon.

Providian Financial (NYSE: PVN) remains one of the top U.S. credit card outfits because it relies on granting credit cards that are secured by bank deposit accounts. The San Francisco-based company could’ve been picked up for $20.15 in September. Batts asks: “Who could resist?” Its target price is $40.

The Pleasanton, California, grocery store giant, Safeway Inc. (NYSE: SWY), was priced at $39.72 in September, down 14.36% since recommendation. Batts believes Safeway is “well positioned” because it owns and operates 1,700 stores. He’s still buying Safeway, which some analysts say could reach $65.