A good example of the kind of stock that Osterweis favors is Crown Holdings (CCK), his fund's fourth-largest holding. He bought shares of the beverage-can maker in 2004, when they were under $9 and the company was struggling with a huge potential asbestos liability and rising commodity costs. The stock is now around 20.

Anothe buy was spirits producer and marketer Diageo (DEO), whose brands include Guinness, Smirnoff, Johnnie Walker and Captain Morgan. He added Diageo to his portfolio in October 2003, when it was changing hands at under 40 a share. It now is in the low 60s. "When we bought it, people regarded it as a hodge-podge of businesses with relatively poor management and no growth," Osterweis says. "What attracted us was that new management came in and essentially streamlined the company. They focused harder on the liquor and beer segments, dumped Burger King, and started buying back the stock pretty aggressively. It was subsequently cleaned up, polished and transformed into a terrific company with a global focus." He considers the stock, which is trading at about 15 times fiscal 2008 earnings and 13 times next year's predicted net, attractive.

Osterweis' fondness for growth sometimes leads him toward investments that are far from plain vanilla. This year, he put more than 3% of the fund's assets into Trian Acquisition (TUX), a special-purpose acquisition company, or SPAC, similar to a blind trust, managed by billionaire investor Nelson Peltz and money manager Peter May. SPACs are set up simply to acquire companies, public or private, and they charge investment fees that can be hefty. But Osterweis saw Trian as an "exciting opportunity" and a smart defensive play; it probably will buy a company in the food or packaging business. If a deal is done, unit holders like Osterweis will receive a stake in the new company. If no transaction materializes, they get their money back, with interest. "It's like cash that could turn into an equity stake in a company run by superb investor-managers like Peltz and May," he says.

This past July, Osterweis bought shares of Lab Corp of America (LH) because of its "attractive valuation and unrecognized growth potential." The company, which runs diagnostic and testing labs around the country, recently was trading at 13.5 times its expected 2008 earnings of $4.59 a share and 12.2 times 2009's estimated $5.10. Revenue is growing at 5%-plus annually. "We expect consistent growth even in a weak economy," Osterweis says.

Another company that he expects to fare well, irrespective of the economy, is HealthSouth (HLS), which runs in-patient rehabilitation hospitals. "Even in a down economy, people are going to continue to get strokes and break their hips and need hospital rehab," Osterweis says. The stock, which is currently trading around 12, has slid by about 40% since Oct. 1, in the market's general downturn. In the money manager's opinion, it has become attractively valued against its peers. The company is expected to generate adjusted free cash flow of about $1 a share this year and $1.30 next year. "And we think earnings and free cash flow will grow pretty steadily over the next few years," Osterweis says. He thinks HealthSouth could double or triple in the next 12 to 18 months.

The Osterweis Fund's second-biggest holding is Websense (WBSN), which has generated a cumulative return of 30%-plus since it entered the portfolio in June 2004. The company develops and sells software that helps companies keep their Internet connections secure. Websense, which is launching several new products in 2009, is expected to make $1.36 a share this year, versus 90 cents in 2007, and its net is likely to hit $1.55 next year. The stock is at around 20.

In energy, Osterweis holds pipeline partnership Magellan Midstream Holdings (MGG), whose distribution growth of 8% to 10% annually should drive 20%-plus profit growth. Osterweis sees Magellan earning $1.40 a share this year, versus 98 cents last year.

He also likes natural-gas producer Questar (STR), which he considers undervalued relative to its expected annual average revenue and earnings growth of 15% and 20%, through 2012. Per-share profits should hit $3.70 a share this year, versus $2.86 in 2007. And demand for the clean-burning fuel is likely to keep rising.