This year's performance has been bolstered by the returns of a number of key holdings, including Chinese insurance intermediary CNinsure (CISG), semicondutor maker NetLogic Microsystems (NETL), and specialty retailer hhgregg (HGG), up 88%, 100% and 99%, respectively, through August.

This year's performance has been bolstered by the returns of a number of key holdings, including Chinese insurance intermediary CNinsure (CISG), semicondutor maker NetLogic Microsystems (NETL), and specialty retailer hhgregg (HGG), up 88%, 100% and 99%, respectively, through August.

This year's performance has been bolstered by the returns of a number of key holdings, including Chinese insurance intermediary CNinsure (CISG), semicondutor maker NetLogic Microsystems (NETL), and specialty retailer hhgregg (HGG), up 88%, 100% and 99%, respectively, through August.

One unappreciated diamond that Sullivan's senior equity analyst, Ed Moore, discovered in November 2008 was Stec (STEC), a solid-state disk-drive maker that the fund bought for $3.80 a share. The stock subsequently skyrocketed, reaching $40 by the end of August, endowing the company with a market capitalization around $2 billion. "The stock may have more legs, but it became too big for a micro cap and we have had to sell our position," Sullivan says.

Similary, Bob Johnson, an analyst at Satuit, saw what he believed was a solid buying opportunity in materials manufacturer Solutia (SOA). It was changing hands around $2 in late March, not long after the stock market had bottomed. "The company recently improved its growth profile by selling its nylon business," Sullivan says. Solutia currently trades near $11, and is expected to earn 75 cents a share this year and 90 cents in '10. "That's solid growth, but the valuation had become rich, and we recently exited the position," he says.

Consumer names that Sullivan still likes include Steve Madden (SHOO), which designs and sells footwear for men, women and children, and is posting solid results. Despite a weak retail environment, the company recently posted quarterly earnings of 66 cents a share, easily surpassing the 49-cent consensus estimate. "We've been patient holders since we initiated a position around 23 in September of 2008 and it has paid off," he says, noting the stock now trades in the low 30s. "We continue to see catalysts to help drive the stock higher." His 12-month price target: 40.

Perhaps Sullivan's favorite consumer issue is Denny's (DENN), the family-style restaurant chain. With about 1,500 restaurants across the U.S. and annual systemwide sales exceeding $2.4 billion, Denny's "may be finally able to serve up some real returns for investors," Sullivan says. The stock recently fetched around $2.75, about 9.9 times this year's expected earnings of 27 cents a share and 8.2 times next year's expected 33 cents a share. "Customer traffic will pick up as the economy recovers," predicts the fund manager, who sees the stock going as high as $3.50 within a year.

Industrial plays that Sullivan and his team like include offshore drilling-equipment supplier Boots & Coots (WEL), which is trading at seven times 2010 earnings estimates of 39 cents a share (it is likely to make 26 cents a share this year), and is growing profits at a 50% pace; and the construction company Sterling (STRL), which is expected to earn $1.54 a share this year and $1.39 in 2010. It could benefit from increased funding in the U.S. for infrastructure spending.