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Picking stocks by watching debt paydowns

The "return on debt paydown" approach to stock selection entails starting with companies that have high-yield bonds outstanding, and identifying the ones that plan to pay down debt and generate enough free cash flow to do so.

SANDY Rufenacht is a bond guy who has figured out a unique way to pick stocks.

The co-manager of the Aquila Three Peaks Opportunity Growth Fund says his high-yield-bond research leads him to companies whose stocks are primed to rise. "We find these ideas in advance of the equity market,"