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Stock picks by the pros
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June 28, 1999: 1:59 p.m. ET
Union Pacific, Raytheon and Cost Plus get the nod
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NEW YORK (CNNfn) - The nation's analysts and money managers continued the hunt for promising companies Monday, finding value in a railroad operator, a small retailer and a defense contractor.
Here are the stocks the latest guests appearing on CNNfn are buying and why:
Pam Milunovich, money manager at Salomon Smith Barney, likes retailer Cost Plus (CPWM), in part for its strong niche in the discount furniture and home products market.
"They have a really nice business mix," Milunovich says. "You either have to be on the top end or in the bottom end providing a lot of value to retailers. The people in the middle are being squeezed out of the picture, and Cost Plus was at the bottom end."
Further, Milunovich lauds the retailer's plans to expand over the next two years, opening 25 new stores next year and 30 in 2001.
Milunovich also sees potential in Profit Recovery Group International (PRGX), which specializes in catching billing mistakes.
"They do accounts payable and they do it for large retailers like Wal-Mart (WMT) and Walgreen (WAG), and what they'll find is billing errors and they can catch things and they'll still be able to pick them up and collect 30 cents on the dollar for every dollar they collect. So we like this business a lot."
Pam Milunovich discussing Cost Plus, whose shares are up 20 percent in the last three months
Predicting an increase in defense spending, Richard Dahlberg, a manager at Pioneer Investments, sees defense contractor Raytheon (RTN) as a key beneficiary.
"Raytheon is going to benefit tremendously from our beefed up military spending after several years of down," Dahlberg said. "We look for that to turn around. And the arsenal of missiles is a little depleted after Kosovo."
Shifting sectors, Dahlberg favors railroad operator Union Pacific (UNP).
"The last couple of quarters, their earnings have exceeded expectations on the upside," Dahlberg said. "The stock's back off from the mid-60s to the mid-50s, so a very good time to reenter the stock here."
Michael Farr, president of Farr, Miller & Washington, recommends electrical equipment maker American Power Conversion (APCC) for the company's growth potential.
"They've got a huge market share," Farr said. "They're the industry leader. American Power Conversion is growing earnings at about 18 percent."
MCI WorldCom (WCOM) is another Farr favorite for the long-distance phone service provider's earnings potential.
"We think over long term, their strategy is good," Farr said. "We think that one is going to continue to grow and is a nice blue-chippy name."
To profit from the needs of aging Baby Boomers, Farr likes Sunrise Assisted Living (SNRZ), which operates 74 assisted living facilities in 13 states
"These guys are the top operator in that industry," Farr said. "And certainly, with the Baby Boomers aging, people living longer, the advances in science and health care, we think that Sunrise Assisted Living is doing a great job growing their earnings and the stock price looks good to us for the long term."
The views presented here are solely those of the analysts quoted. They do not represent opinions of CNNfn on whether to buy or sell shares of a particular stock. 
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