Why one fund manager thinks renewed pessimism has created a 'stock picker's market'

Pessimism and fear are creating opportunities in the second half of 2010 for those with cash, said Terry Diamond, chairman of Talon Asset Management. “I think we’re going to be in a stock picker’s market,” said Diamond, 71, in an interview at Bloomberg headquarters in New York today. “We were probably too optimistic coming into April and a little over pessimistic right now and that creates opportunities for those that have dry powder.” The Standard & Poor’s 500 Index has fallen about 6.6 percent this year on concern that widening budget deficits in Europe might derail global growth. Diamond said his investment-management firm, based in Chicago, is looking at companies that make products that people “need as opposed to what they want.” The firm recently bought CVS Caremark Corp., Energizer Holdings Inc. and Cintas Corp., and is looking at companies such as Carnival Corp., he said. Talon has $1.2 billion in assets spread among three hedge funds, individually managed accounts, private equity and venture capital. Diamond oversees Talon’s investment activities and serves as a portfolio manager of Talon Opportunity Partners L.P., a hedge fund. Diamond co-founded the firm, which started managing assets in 1984 and is owned by its employees. They require a minimum investment of $1 million and charge clients a fee of 1 percent, he said. The Chicago native worked at companies including Lehman Brothers Holdings Inc. before Talon and has a law degree from the University of Chicago Law School.