Schafer: My second company is Medivation. Its market capitalization is only about $400 million. It is a bio-pharmaceutical company focused on acquiring and developing small-molecule drugs. Its lead compound, Dimebon, is designed to treat Alzheimer's and Huntington's disease. Its other product is a once-daily oral treatment for prostate cancer.

Schafer: My last stock is Wyndham Worldwide, one of the world's leading hospitality companies. It operates in three segments. The lodging segment is the largest hotel franchiser in the world, operating Wyndham, Ramada, Days Inn and other properties. The vacation-ownership business is the world's leading provider of time shares. RCI includes the largest vacation-exchange network, as well the leading European vacation-rental group. Wyndham's brands range from economy to upscale, with most rooms in the economy and mid-scale markets.

Schafer: Experian Group is the largest credit bureau in the U.S., U.K. and Western Europe. It owns credit data on more than 450 million consumers and 35 million businesses. It also has files on motor-vehicle histories, insurance policies, household purchasing trends and consumer Internet traffic. There are substantial regulatory and economic moats protecting its core business. Experian helps organizations find new customers and develop and manage relationships. It also helps consumers understand, manage and protect personal information, and make more informed purchasing decisions. The stock fell sharply on fears regarding slowing mortgage activity and consumer spending. These fears are overblown.

Schafer: Investors underestimate TransAlta's exposure to rising power prices. In the next four years, the company will realize about C$400 million of increased profitability primarily from repricing its merchant Alberta and Pacific Northwest power plants. This should drive Ebitda to about C$1.5 billion in 2011. Earnings of C$1.40 a share in '07 should improve to more than C$3 in '11. Normalized discretionary free cash flow is about C$1 a share more than earnings, due to high depreciation and amortization, so the stock is cheaper than its P/E would suggest. The story really gets interesting when you consider the possibility of strategic changes.