NEW YORK ( TheStreet) -- Technology and commodities stocks are hot this year, but the Alpine Dynamic Financial Services Fund's (ADFSX) Peter Kovalski says beaten-down financial-services companies such as Synovus (SNV), the IntercontinentalExchange (ICE) and MF Global (MF) are the best bets.
The mutual fund has returned 9% this year, better than 89% of its Morningstar (MORN) peers. During the past three years, the Alpine Dynamic Financial Services Fund has risen an average of 4% annually, putting it in Morningstar's 10th percentile for financial funds.
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 the state of banks today? Are they solid?Kovalski: The larger-cap names have essentially recapitalized so they are strong. The economy is starting to pick up. So we are at the beginning part of what think will be a long-term upward cycle in financials, specifically bank stocks. Synovus is a regional bank based in the Southeast, an area hit harder than most during the credit bubble. Why do you like this particular bank stock? Kovalski: This is a little bit of a controversial name. It's a turnaround situation. It's time to go down the credit scale of banks. The economy seems to be bottoming out. Real estate prices appear to be stabilizing. A bank like Synovus, which has some credit issues reflected in the stock, will have a better long-term return than a bank of better quality at this time. Another controversial name in your portfolio is the IntercontinentalExchange. It is fighting with the Nasdaq (NDAQ) to buy the NYSE (NYX). Kovalski: In the long term, this is a bit of a distraction on their part. If they are successful, it will add some growth to their bottom line. If not, then the company is well-positioned. They have more than one line of business as compared to the CME (CME) so I think there are more growth opportunities for the company to outperform its peers as the capital markets continue to turn around. On a smaller scale, what's attractive to you about the micro-cap investment bank JMP Group (JMP)? Kovalski: JMP is in a position to get more equity-underwriting business as the capital markets improve. There are fewer players in the market right now, so there is more of an opportunity for a boutique shop like theirs to get into the selling group and perhaps on to the front page of a large, lead-managed account than it was in the past.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV