The markets lost a little ground this week, taking a bit of a breather, though most economic reports were pretty good. I think there’s some concern over the increasing cacophony of “Sell in May and go away,” but I also believe wise investors should ignore that advice.

I’ll spend a little time next week commenting on that, as well as some other adages that are mostly outdated, in a column next week. But today I want to reiterate that the economy is improving and there’s no reason why the markets can’t continue to rise.

This week’s economic reports included a rise in factory orders, fewer job cuts, declining unemployment claims (though I’ll concede they weren’t as good as estimated), and an unemployment rate that has fallen to 8.2%.

So let’s forget about the naysayers for now. I don’t believe every single stock is going to jump through the stratosphere, but I do think it’s a good time to be a stock picker, searching for companies that have fabulous potential. This week I narrowed my criteria a bit more and still came up with 22 companies that look enticing.

Here are my two favorites:

Leggett & Platt (NYSE:LEG)

LEG makes products for the residential bedding and upholstered-furnishings market; the commercial fixture-and-furniture sector; the industrial-materials segment, including bedding and furniture and mechanical spring makers; automotive seating and lawn-and-garden equipment manufacturers; waste recyclers, waste removal and medical-supply businesses; aerospace suppliers and original-equipment manufacturers; and specialized products markets.

Price: $23.19

Market cap: $3.25 billion

Dividend yield: 4.9%

Target: $29

Why I like it: Improving economic conditions should strengthen each segment for LEG, new analyst upgrades and a nice dividend yield if the market decides to rest for a while.

Skullcandy (NASDAQ:SKUL)

SKUL develops and manufactures headphones and other audio accessories sold by retailers in the U.S. and to global distributors.

Price: $17.04

Market cap: $466.32 million

Target: $24

Why I like it: Good margins, possible takeover candidate, smart marketing to young adults via mobile and social media and a growing demographic base.

SKUL is a small-cap stock, so please understand that investing in the company may entail more risk than buying shares in its larger competitors. Consequently, if you decide to purchase SKUL, please make sure the shares constitute only a small portion of your portfolio.

I intend to establish a portfolio of similar picks, some 25-30 stocks that I’ll update on a regular basis. I will discuss them from time to time in my blog and on this website, but a full analysis of each stock — as well as detailed updates — will be available only via subscription. If you’d like more information, contact me directly, at nzambell@frontiernet.net.