NEW YORK (TheStreet) -- Shares of Ford (F), which have fallen 8% this year while the S&P 500 Index is rising, will rebound on signs car sales are growing, says Ron Muhlenkamp, manager of the Muhlenkamp Fund (MUHLX).
The $638 million mutual fund, which garners two of five stars from Morningstar (MORN), has returned 5.2% over the past year, putting it in Morningstar's 99th percentile. Over the past 10 years, the Muhlenkamp Fund has risen an average of 4% annually, better than 49% of its rivals.
Welcome to TheStreet'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.What's it going to take to get shares of Ford moving higher again? Muhlenkamp: If we are right that people will continue to buy cars, then Ford shares will work their way higher. There are at least a few more years in the expansion of auto sales so we are quite content to own Ford shares. What about car sellers like Asbury and Sonic Automotive? Are they in the same boat as Ford? Muhlenkamp: They have a ways to go. Car sales have been working their way back gradually. And while they do, of course, the cars already on the road get older. The reason why we own Sonic and Asbury is that they are auto retailers. You probably recall that GM and Chrysler both closed a lot of dealerships. There are about 30% fewer dealerships now. The auto-parts suppliers have already run-up quite far but the retailers have not. Why do you believe large technology companies are so cheap right now? Muhlenkamp: European banks and insurance companies were big sellers of big-cap technology in 2010 when the extensive problems in Europe were being revealed. Pressure has kept stocks cheaper than they otherwise would have been. When we look for values in the current marketplace, we are finding them in big-cap tech, particularly IBM (IBM), Cisco (CSCO) and Oracle (ORCL). That selling should be over now. That's our rationale for why they have stayed this cheap for this long. Of all the natural gas plays out there, why do you like DuPont (DD) the best? Muhlenkamp: Natural gas is a feedstock for DuPont. Natural gas in this country is selling for less than half of crude oil on a BTU basis. In the rest of the world, natural gas prices tend to run with crude oil. So if you have chemical plants in the U.S. that are using U.S.-sourced natural gas as a feedstock, then you have a great cost advantage versus chemical makers in other parts of the world where they are paying more for their gas. That's an ongoing advantage.
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