While rising interest rates would throw a wrench in the equation by making bond yields more attractive by comparison, Frels says continued high unemployment and housing market troubles make it unlikely that the Federal Reserve will allow rates to rise significantly. At the same time, with signs of moderate growth throughout the economy, he does not see the U.S. falling into a double-dip recession.

A saving grace for the economy will be growth in emerging markets and the benefit that U.S. companies will reap from it. Longtime holding 3M, for example, derives one-third of its sales from those markets. Based in St. Paul, the company behind Post-it notes, Scotchgard, Nexcare Bandages, Thinsulate, and other products expects developing markets to account for 45% of sales by 2015.

Another holding, Emerson Electric, has been a beneficiary of the market's focus on cyclical industrial companies that stand to benefit from an improving economy and higher capital spending. Headquartered a few miles from Frels' office, Patterson Companies has grown to become the second-largest distributor of dental supplies in the country and is increasing its presence in veterinary supplies as well.

At 18% of assets, health-care represents the fund's largest sector weighting. Frels points to longtime holding Medtronic as a "major disappointment over the last several years." The medical technology company, whose products include pacemakers, defibrillators and insulin pumps, has had difficulty overcoming investor concerns about loss of health-insurance coverage with high unemployment, as well as uncertainty surrounding medical reimbursement under the new health-care mandates. The company also has a number of new products awaiting FDA approval, which Frels suspects are being held up as the federal government tries to avoid expensive new treatments for Medicare patients. Other holdings in the sector, such as Pfizer and Johnson & Johnson, face patent expirations and more competition from generic products.

But the tide of aging baby boomers needing drugs and medical equipment will eventually prove powerful enough to overcome what he considers such short-term investor concerns. And almost as surely as Minnesota winters are cold, the fund's manager will wait patiently for that to happen.


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