Buying Industrial Stocks

While skeptical of financial and pharmaceutical stocks, Shearer has been buying industrial stocks. Holdings include Caterpillar (CAT), General Electric (GE), and Deere (DE). Deere raised its dividend 17 percent on May 24--its ninth dividend hike since early 2004.

Deere and other manufacturers are benefiting from strong demand from emerging markets, says Shearer. They cut costs during the recession, so they have good profit margins. "As Europe and the United States start to meaningfully recover, these companies are going to have strong" earnings, he says.