He will sell a position if the price rises to his estimates of intrinsic value, fundamentals deteriorate, a position becomes more than 7% of the portfolio, or he wants to swap a holding for one that's more attractive. Thus, out went Sara Lee (SLE) and Gannett (GCI) last quarter.

He will sell a position if the price rises to his estimates of intrinsic value, fundamentals deteriorate, a position becomes more than 7% of the portfolio, or he wants to swap a holding for one that's more attractive. Thus, out went Sara Lee (SLE) and Gannett (GCI) last quarter.

He likes United Technologies (UTX), which he bought last May at 67, because it generates heavy free cash flow and usually redeploys it to the benefit of shareholders. "It is a solid international manufacturer in a wide range of growing markets, with a significant portion of both revenue and profits coming from international markets," he says. It was recently trading above 70. The Street expects earnings to rise to 4.86 a share in '08 and 5.43 in '09.

He also likes Sysco (SYY) because it has a dominant distribution company serving the growing food-service industry: "Sysco is trading at a historically low valuation, given concerns related to the economy and consumer." He bought it at 33 last autumn; it's now below 28, but he believes its competitive positioning will lift it long term. Earnings are expected to grow to 1.78 a share in '08 and 1.98 in '09.

Bath started buying General Mills (GIS) in March 2006 near 48; the stock was recently at about 60. It has benefited from a strong market share in healthy-product segments, with a good mix of domestic and international business. If commodity prices moderate, General Mills is also well-positioned for growth potential. Earnings per share may dip to 3.48 in '08 but are seen bouncing up to 3.80 in '09.

"While the inflation rate is up, our biggest problem is deflation in the price of our homes," Bath notes, as homeowners face the music from maxing out credit cards after taking on mortgages they couldn't afford. "Consumer spending could be under pressure for quite a while now," he says. Bath is ready: He owns downturn-defensive name Johnson & Johnson (JNJ) -- which last week reported a 40% jump in first-quarter profits.

Bath has been buying Apache since July 2003, when it was 31; it now trades around 138. "The intrinsic value of the stock is rising faster than its stock price," he says. "It has had rapid earnings growth, and has long-term contracts in natural gas that are expiring and being repriced at higher levels." The Street puts earnings per share at 11.74 for 2008 and 12.67 for '09.

He sees Apache and Devon as relatively inexpensive and well-positioned to profit from continued global demand.