A story can trump what numbers tell you, McCallister concludes. And, so, against his general policy, "we do have a few companies with a good amount of debt, but they better be good," he says. Consider Time Warner (TWX): "It has 4 times debt to [earnings before interest, taxes, depreciation and amortization], but is a stable business; subscribers have grown even during the downturn."

One of his big holdings is Danaher (DHR), a Washington D.C.-based maker of medical and industrial diagnostics. Danaher's cash rate of return is 15%, down from its historical 20%, and its asset growth is 12%, down from an historical 20%. "If both go back to historical levels in the next five years, the stock [now at 70] will be greater than 100," McCallister says.

Eagle mid capt steers clear of traditional banks and finance companies, which McCallister says carry too much credit risk. Yet 16% of his portfolio is in nontraditional financials such as insurance companies and exchanges. Among his favorites: CME Group (CME) and IntercontinentalExchange (ICE), which both operate global electronic-derivatives exchanges. "When something goes wrong in the world, volumes in stocks go down, and volumes on derivative exchanges go up. These companies are at 18 times earnings...But the returns on capital are sky-high."

Eagle mid capt steers clear of traditional banks and finance companies, which McCallister says carry too much credit risk. Yet 16% of his portfolio is in nontraditional financials such as insurance companies and exchanges. Among his favorites: CME Group (CME) and IntercontinentalExchange (ICE), which both operate global electronic-derivatives exchanges. "When something goes wrong in the world, volumes in stocks go down, and volumes on derivative exchanges go up. These companies are at 18 times earnings...But the returns on capital are sky-high."

Another nontraditional financial stock McCallister likes is Fiserv (FISV), whose business is split between Internet banking and account processing for loan originations and other services. McCallister sees the Internet-banking side achieving double-digit revenue growth over the next year: "If you want to play a recovery in the banking system, we argue you should hold Fiserv; it has 10% free cash flow and is undervalued by 100%."

Sectorwise, Eagle's managers see technology poised for the best growth. "Tech companies have the best numbers, the best balance sheets, and they're carrying a lot of cash, which means they're in a position to make acquisitions," McCallister says. "If the dollar continues to weaken, technology could benefit, because it's our best export industry." Among companies Eagle likes: Ansys (ANSS), which designs engineering simulations. Says Thomas: "It has outspent its competitors in research and development, and taken leaps and bounds of market share."