His top holdings include many electronics outfits (he once ran an electronics fund for Fidelity), such as Apple (AAPL), Cisco Systems (CSCO) and IBM (IBM), all of which have suffered big price drops in the downdraft created by the credit crisis. That doesn't faze him because he invests with at least an 18-month time horizon.

His top holdings include many electronics outfits (he once ran an electronics fund for Fidelity), such as Apple (AAPL), Cisco Systems (CSCO) and IBM (IBM), all of which have suffered big price drops in the downdraft created by the credit crisis. That doesn't faze him because he invests with at least an 18-month time horizon.

His top holdings include many electronics outfits (he once ran an electronics fund for Fidelity), such as Apple (AAPL), Cisco Systems (CSCO) and IBM (IBM), all of which have suffered big price drops in the downdraft created by the credit crisis. That doesn't faze him because he invests with at least an 18-month time horizon.

Although Oracle, like every vendor, is under pressure to provide discounts, he thinks it can gain share in a downturn and still expand margins. "They can control their own destiny," Pesek says, because the company is dominant in database software, with a 49% share, up from 39% five years ago. What's more, it's been a very active buyer of applications businesses such as Prima-vera, Hyperion and BEA. Oracle "is a little bit controversial in terms of organic versus acquired growth, but the company has a visible margin-expansion path," Pesek explains. The Street puts Oracle's earnings per share at $1.50 in '09 and $1.68 in '10. He added to his Oracle position last spring when it was in the high teens to low 20s. Oracle was recently trading near the bottom of its 52-week range at $18.32 a share, or less than 12 times 2009 earnings projections.

Pesek also likes Cambridge, Mass.-based Genzyme (GENZ), a biotech outfit focused on diseases stemming from enzyme disorders. "Its small nichey markets provide an opportunity to raise prices," Pesek says, noting that many of its pipeline products -- such as Myozyme, for treating often-fatal Pompe disease, which can affect muscles and the heart, and Mozibil, used to increase stem-cell counts in transplants -- benefit from orphan-drug status. Campath, for multiple sclerosis, differs because it has a potentially enormous market. The National MS Society estimates that about 200 Americans are diagnosed with this auto-immune disease every week. Overall, there are about 400,000 people in the U.S. and more than 2.5 million people worldwide suffering from MS. "Management believes they can achieve a compound annual growth rate in earnings per share of 20% from 2007-2010, and if pipeline products are successful that will be even better," Pesek says. He added to his Genzyme stake in the summer of 2007 when the stock was trading in the low to mid-60s. More recently, it's been trading at 70.20. The consensus estimate for Genzyme's EPS is $3.97 in '08, $4.73 in '09 and $5.55 in '10. Its price-to-earnings multiple works out to about 15 times '09 estimates.

He thinks CVS Caremark (CVS) is undervalued because it sells at 11 times 2009 EPS, versus an average of 15 times for pharmacy benefits-management plays generally. He notes that half the Woonsocket, R.I.-based company's earnings come from this benefits-management portion of the business, which can play an important role in controlling the country's drug costs. Return on invested capital is improving, and the company's business mix has been remarkably resilient over time, says Pesek. He began buying in the summer of 2007, when it was in the mid-30s. It has since dropped to below 25, but he sees good potential for growth, since it has about a 18% share of the prescriptions written in the U.S. That's below Walgreens' and mail-order's share but represents a rising portion compared to independent outlets. CVS' earnings are expected to be $2.46 a share in '08, $2.77 in '09 and $3.19 in '10.

Core Growth Fund is run on a fundamental, bottom-up basis and mostly eschews the macro environment in making investment decisions. However, Pesek does think that people will eat at home more as the economy cools, and he's recently bought Groupe Danone SA (BN.France), the French food company, as a potential beneficiary of that trend. Danone, he notes, has a 36% share of the yogurt market, which has grown in the 4% to 10% range in recent years. And falling commodity prices could aid margins. Danone has also gotten into the baby-food business via an acquisition. Pesek says Danone has a mid- to high-teens EPS growth rate, yet a lower than average valuation versus European peers that aren't growing as fast. And Danone has a rising return on invested capital. The Danone position was built up last summer and added to in the spring of 2008, when it was in the high 40s to low 50s euros. The share price, recently at 43 euros, hasn't gone anywhere, but EPS projections of €2.77 in '08, €3.12 in '09, and €3.54 in '10 would give it a P/E of roughly 14 times 2009 earnings. And that's just the sort of stock that appeals to Pesek, especially in scary times.