Jones Villalta Loves the Loathed of Wall Street

NEW YORK (TheStreet) -- Financial stocks such as Goldman Sachs(GS) and Hartford Financial Services(HIG) may still be despised on Main Street because of the bailout, but they are a perfect fit for contrarian investors looking for oversold names, says Thomas Villalta, portfolio manager for the Jones Villalta Opportunity fund(JVOFX).

The $2.2 million fund, launched in December 2008, is up slightly over 1% in the past year, putting it in the top third of all large-cap value funds, according to Morningstar(MORN).

Welcome to TheStreet.com's Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks and views on the market in a five-question format.

Why is the financial sector still so hated?

Villalta: There is a lot of hate on the part of the general public when it comes to the financial sector due to TARP and the recipients of the TARP money returning to profitability even though there is still a recession going on for the public at large. And then you also have a lot of uncertainty related to financial regulatory reform, which is causing angst among analysts and portfolio managers.

Perhaps the most hated name on Main Street within the financial sector is Goldman Sachs. Is that public anger part of the reason why you like it?

Villalta: It's the largest holding we have in the portfolio now. It's a little more than 4% of the overall portfolio. We think that this company can do $20 to $21 a share in earnings 2011 and that it should trade at a higher multiple than seven or eight times earnings. We see significant upside to this stock.

Another financial that you are quite high on is The Hartford. Why this one?

Villalta: Businesses have cut back on their spending on insurance because of the recession. That will come back over time as the recession recedes and as company profitability continues on the path that it is on. And for that reason we think that there is a lot of value in this company from a growth standpoint.