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Which Sectors, Companies Will Continue to Benefit From the Recovery?

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You don't want to be in stocks where the expectations have been modeled...you want to find the companies that can still surprise to the upside when they report earnings.

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In discretionary, however, it is very much the haves and have-nots. The companies that are doing well in consumer discretionary and that are getting a portion of the consumer wallet-now remember, the consumer wallet is still down pretty big from the peak, so we are seeing less spending-the companies that are winning and taking market share, be that an Under Armour (NYSE:UA) or Starbucks (NYSE:SBUX), there are a handful of companies that are doing a pretty good job of growing their revenue and earning better than investors have believed they could. And they are really doing that at the expense of a lot of other companies; in some instances better than staples.

We can look at customer discretionary and we can look at customer staples and put them together and say, are we about where we want to be? The reality is it is always company-specific.

What kinds of companies do we think we can find that are exceeding investor expectations and doing a good job? And in staples proper, a lot of that, we think, is priced in. Not a lot of surprises really going forward.

Gregg Early: Wow, interesting. That rifle approach, I can see where the trends as the green shoots come up that you have much more upside opportunity there. Where the flight to safety with the staples has run its course.

Michael Sansoterra: We think so. Which is not to say that the large beverage companies don't do well...I just don't think they surprise. We want to be positioned in the places where investors haven't sorted it out in its entirety.

Stock prices go up when the expectations are wrong, and I think a lot of the companies in staples have been pretty well modeled, pretty well understood, and are carrying pretty decent premiums for their safety potential.

Editor's Note: This article was written by Gregg Early of MoneyShow.

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