Five Spot: Baggini Says Market Hit Bottom

Chris Baggini, manager of the $150 million Aberdeen Equity Long/Short Fund(MLSAX Quote), says the stock market has probably hit bottom, even though some investors are calling for a second-stage slide over the next several months.

He's investing in home-improvement chain Lowe's(LOW Quote) and computer maker Hewlett-Packard(HPQ Quote) in anticipation of a rebound.

His fund, which has earned four stars from Morningstar, has lost 9.1% in the past year, outperforming the S&P 500 index's 31% drop. Over the past three and five years, the fund has returned an average of 1.3% and 4.6% annually, beating the benchmark during both periods.

He offers his investment ideas in the Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks in five fast and furious questions.

Are you a bull or bear?

Baggini: We are bullish on the second half of 2009 and the first half of 2010 because we believe the economy has most likely bottomed and estimate revisions will be skewed positively from here on in. We see a lot of positives in the economy including: tightening credit spreads, improving housing turnover, better investment liquidity, improving commercial paper activity and improving Chinese economics.

What is your top stock pick?

Baggini: At Aberdeen, we follow a bottom-up process based on a disciplined evaluation of companies through direct visits. We try to buy good companies with good management teams that we think can differentiate themselves through new products, distribution or management that are under-appreciated by the street in terms of valuation.

One stock we think fits this description very well is Hess Corp.(HES Quote), which has demonstrated better-than-expected exploration and production results. They also have significant exposure to the sizable Brazilian oil find.