Top picks from top pros

Money tapped the brainpower of the lead managers of six top-performing mutual funds in every major category. Here's what they're buying.

4 of 6
BACKNEXT
Watching the cash flow
Watching the cash flow
Diane Jaffee
TCW Dividend Focused (TGIGX)


How she invests: Jaffee strives to maintain a portfolio of large-cap stocks with a dividend yield that exceeds that of the S&P 500. But she's not averse to buying lower-yielding companies that have the potential for dividend increases.

Where she is looking: "In 2009 consumer discretionary stocks were the third-best-performing sector. It wouldn't surprise me if we added more industrials, which tend to bounce later in the business cycle.

"Domestic firms have more cash on their balance sheets right now than at any point since the 1960s. That means we will probably see some strategic acquisitions. And major companies like JPMorgan and Pfizer (which Berkowitz also recommends) all have the wherewithal to increase their dividends."

Her picks:
Packaging Corp.
"It makes shipping materials and had to cut its dividend last year owing to the downturn. But the company has had positive earnings throughout the trough. And basic materials are an incredibly important area in the world economy."

JPMorgan
"This is the largest position in the portfolio right now. JPMorgan has the chance to service more depositors and gain market share. And its cash flow is in such good shape that it should increase its dividend starting this year."

Pfizer
"The drug giant cut its dividend last year because the company had a once-in-a-lifetime opportunity to buy competitor Wyeth. The acquisition gives Pfizer a lot of room to cut costs, and it is generating lots of cash. The dividend should go up again soon."

NEXT: Going where others dare not
Last updated January 05 2010: 1:04 PM ET
Email | Print | Share  |  RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
Bruce Berkowitz, David Herro, Eric Ende, Diane Jaffee, John Rogers, Dan Fuss and Kathleen Gaffney contributed to this article.
More Galleries
Our biggest money highs and lows How much money do you need to feel rich? What are your biggest money mistakes? Money magazine surveyed 1,000 Americans for the answers to these and other questions. See how your answers stack up. More
How we feel about our finances Participants in an exclusive Money magazine survey reveal how they feel about their finances. Although the Great Recession may be over, they're not all that confident about their prospects for the long run. More
8 ways to cut your tax bill To keep your tax bill as low as possible this filing season, you need to stay on top of all the ways the rules have changed. More

Special Offer
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.