A Growth Manager's Retail Shopping List

Christmas is now a distant memory, but that's not stopping fund manager Kelli Hill from making a wish list.

"The recent pullback in global markets has given us a fantastic opportunity to buy stocks in sectors that have been hammered, such as financial services and consumer discretionary," says Hill, who oversees more than $4 billion in assets for Ashfield Capital Partners, an arm of Old Mutual. "Valuations are reasonable, and the American consumer has money and more confidence than people think."

Among the funds Hill co-manages are the $134 million (OAHEX Quote - Cramer on OAHEX - Stock Picks)Old Mutual Select Growth fund, which has returned 9% annually over the past three years, three percentage points better than the S&P 500, and the $88 million (OALHX Quote - Cramer on OALHX - Stock Picks)Old Mutual Large Cap Growth fund, which has been up 6.2% per year over the past three years, 30 basis points better than the index.

By refusing to underestimate the American consumer, Hill adopts a strategy that has been a consistent winner through the years. Now she offers a new wrinkle on the old adage, saying foreign shoppers can be trusted as well.

"Demand from global consumers for western brands is high," says Hill. "There is a new middle class out there -- even in emerging markets -- and they are not just buying our soap anymore."

Hill advises against buying shares of big box retailers and discounters like Wal-Mart(WMT Quote - Cramer on WMT - Stock Picks) and Target(TGT Quote - Cramer on TGT - Stock Picks) due to their thin margins and lack of pricing power. Instead, she prefers specialty retailers, which offer product differentiation in areas like footwear and jewelry.

As for those beaten-down financials, Hill fortunately did not own the megabanks coming into earnings season (or what might now be called "Write Down Season") because of their earnings uncertainty. She says she will continue to favor the steadier returns of money managers and asset gatherers in 2008, as opposed to money center banks, which need to sort themselves out.

A final growth sector in Hill's opinion is technology, where she asserts that the global capex cycle is just getting started, even as the domestic market cycle for technology nears its end.

As for defensive plays, the growth manager says many areas where investors traditionally hide during volatile markets are not that safe at all.

"Large pharma companies now rely too heavily on large blockbuster drugs and they don't always work out," says Hill. "And the soda and detergent makers have no pricing power."