As evidenced by GM's latest numbers, the auto industry is roaring back and Russell Croft, portfolio manager for the Croft Value Fund (CLVFX ), expects auto parts maker Dana Corp. (DAN - Get Report) to come along for the ride.
"Dana's new CEO is really focused on margins and we think that's a catalyst for the stock which is already trading cheaply at around seven times next year's earnings," says Croft.
The $331 fund, which garners 3 stars from fund-rater Morningstar has lost 4% in the past year, putting it in Morningstar's 89th percentile for large cap blend funds. Over the past five years, the fund has returned an average of 2% annually, outpacing 90% of its Morningstar rivals.Outside of autos, Croft likes crop irrigation system maker Valmont (VMI - Get Report), which he sees as a play on rising farmland prices. "With corn prices heading higher, the farmers can afford this equipment and it really helps the productivity of the land," says Croft, adding that the stock trades at a reasonable 15 times forward year earnings despite a 62% year over year jump in earnings. Croft is also bullish on International Paper (IP - Get Report) as a play on the consolidating containerboard industry. "They have a really strong balance sheet, a 3.5% dividend yield, they buy-back stock and the catalyst here might be the DOJ ruling on the Temple-Inland merger. If that goes through, it's a good push for earnings, but we like the stock either way," says Croft. Finally, Croft likes Ultra Petroleum (UPL - Get Report), as a contrarian play on lagging natural gas prices. "It's cheap, trading about 10 times earnings and it's a very low cost producer. So even in this environment, it can do well. And despite it being out of favor now, we think natural gas is a very important part of the U.S. energy policy going forward," says Croft. >>To see these stocks in action, visit the 4 Favorite Value Stocks portfolio on Stockpickr.