Five Spot: Barringer Favors Financials

Robert Barringer, manager of the FBR Pegasus Fund(FBRPX Quote), is bullish, particularly on financial stocks, as credit becomes unstuck.

The fund has risen 13.7% so far in 2009 on its way to beating its rivals for the third year out of four. Morningstar gives the fund its highest rating of five stars.

Welcome to TheStreet.com's 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 a bear?

Barringer: I am a bull. The S&P 500 Index is off over 40% from the peak in 2007, with financials and industrials off even more. We have seen those more-sensitive areas show signs of stabilization, the first step toward improvement. We are seeing investor sentiment improve as well, as illustrated by recent investor willingness to commit new capital to shore up a number of our major financial institutions.

What is your top stock pick?

Barringer: When searching for a stock to buy, first and foremost, we make sure the balance sheet is solid, so we aren't worrying whether a company is going to have credit issues. More importantly, we examine profitability metrics such as return on equity, profit margins and valuation. We are looking to invest in very good companies at reasonable prices whose stocks we believe will follow the upward movement of book value per share.

My top stock pick is T. Rowe Price(TROW Quote). I believe the company has excellent profitability, a fortress balance sheet, a reasonable valuation and is leveraged to an improving economy and stock market.