Is it a bull market or just a bubble? In our annual stock-picking contest, a panel of professionals select shares they think will stay up no matter what happens.

• Author: Maley, Frank
• Position: FEATURE - Company overview

Commenting on one of his photos that appeared in this magazine, Will Mitchell joked that he picks stocks better than he picks barbers. After an inauspicious debut in BUSINESS NORTH CAROLINA'S annual competition--professional wrestler Ric Flair's selections outperformed his--he laid to rest any questions about his claim. Thanks largely to his choice of Cree Inc., a Durham-based maker of high-tech lighting products, Mitchell bested the other panelists in a year when a portfolio-gutting bear market turned bullish.

Each panelist is asked to pick three stocks of North Carolina-based companies they think will produce the best average annual total return. A year ago, the five pickers didn't have a moneymaking stock among them. In the 52 weeks ended Oct. 30, three finished with positive returns as the market rebounded from its nadir in March. Picking high-performing stocks for the year ahead could prove dicier. Mitchell, for one, says the general rise in prices is a blip in a longer-term bear market. "After the last two years, everyone has pulled in their horns. People are saving more, and they're taking less risk."

The nation's credit-fueled economy of the past 20 years has given way to one in which lenders are tightening terms and regulators are increasing oversight. "That's going to have some type of constraint on growth," says Mitchell, a certified financial planner with Southeast Investments N.C. Inc. in Charlotte. He sees the stock market peaking in the first quarter.

John Woodard, president of Woodard & Company Asset Management Group Inc. in Advance, finished second, and he, too, is taking a defensive view, using two of his picks this year on utilities. Gross domestic product increased 2.8% in the third quarter, providing some reason for optimism. But Woodard sees special circumstances at work. "Right now, we're running on stimulus money. Our third-quarter GDP demonstrated that. If the consumer does not step up and start buying by midyear, then we're going to have a very difficult time. We may very well slide back."

Larry Carroll

President

Carroll Financial Associates Inc.

Charlotte

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Community banks have been hit hard by the bad economy and weak stock market. Their prices continue to suffer from concerns about the real-estate market. High-quality small banks are going to see higher interest margins and lower loan losses, which will result in higher earnings in 2010. Each of the following picks has been selling at less than the tangible book value per share.

BNC Bancorp

Bank of North Carolina, the company's lone subsidiary, opened its doors in 1991. It is one of the few midsized banks in North Carolina healthy enough to acquire a troubled bank from the Federal Deposit Insurance Corp. Its overall financial health and commitment to growth could open opportunities in a difficult market.

Park Sterling Bank

In the interest of full disclosure, I am chairman of this company. In three years of operations, the bank has grown to more than $470 million of assets and has an experienced management team that continues...