Money manager Eric Kuby isn't upbeat at all on the market, so he has been extremely careful in picking stocks for the $100 million portfolio of Rodman & Renshaw Capital Group, of which he's chief investment officer. Kuby searches for the unpopular but undervalued company with hard assets--and little Street following. One of his first picks this year, Universal Matchbox Group, ended up being taken over recently by Tyco Toys, at 10 3/4 a share. The stock was trading at 5 in March when it caught Kuby's eye.

So what's his next big winner? Kuby thinks it will be Champion Parts, a major rebuilder of auto and truck parts. Kuby believes the risk in the stock is very low. It's trading at 3 7/8, with a book value of 8 a share. The company posted an 18 cents-a-share loss last year because of nonrecurring costs arising from a restructuring and early retirement of subordinated debt. But with the economy recovering, Kuby expects Champion to earn 35 cents a share this year and 60 next year.

Kuby thinks the company is a juicy takeover target. One big shareholder is Echlin, the major auto parts maker. It owns 16.5% of Champion. Some investors are betting that Echlin will make a move on Champion. Other industrial companies may be interested in Champion as well, says Kuby. He figures the stock is worth at least 8 a share, based on the earnings turnaround alone. A Champion spokesman declined comment.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE