Avoid Alternative Energy, Buy Philip Morris

BOHEMIA, N.Y. (TheStreet) -- Steven Roge, manager of the Roge Partners Fund(ROGEX), favors consumer staples stocks, such as Philip Morris International(PM), and steers clear of alternative energy companies.

The $12 million global stock fund has returned 52% during the past year, trailing its category by 8 percentage points. However, the fund has gained 5.6% this year, outperforming 93% of its peers, according to Morningstar(MORN).

Welcome to TheStreet's Fund Manager Five Spot, where America's top mutual fund managers share their investment views in five fast and furious questions.

Are you a bull or bear?

Roge: We are bullish on stocks and bearish on bonds. Although stocks have run up fast and are roughly at fair value, we expect the equity markets to generate returns of 6% to 8% over the next 10 years. We arrive at that range by adding the market's current yield of near 2% to its earnings yield of 4.7% and allow for some price-to-earnings ratio expansion. It is hard to imagine a scenario in which bonds prices are pushed up further while rates trend lower. The Federal Reserve will have to tighten rates at some time in the future.

What is your top stock pick?

Roge: Our top stock pick is Philip Morris International. It is a well-run cigarette manufacturer trading at a low valuation of under 11 times operating earnings. Philip Morris routinely earns sky-high returns on invested capital and has a dominate market position around the globe. It also sports a dividend yield of over 4.5%.

What is your top under-the-radar stock pick?

Roge:We like Winthrop Realty Trust(FUR). This small REIT is managed by Michael Ashner. Considered a shrewd operator, he's worked with heavy hitters such as Carl Icahn on a number of real-estate deals. Ashner had the sense to sell a substantial portion of his real estate holdings prior to the market collapse, generating a very strong cash position to take full advantage of opportunities presented by the economic recovery.

What is your favorite sector?

Roge:We continue to like the consumer goods sector. In particular, we like the alcohol, tobacco and foodstuff industries. There are strong and dominate brands in those areas that should be able to weather any storm.

What sector or stock would you avoid?