NEW YORK (TheStreet) -- Large-cap dividend payers Home Depot (HD) and Johnson & Johnson (JNJ) are poised to move higher as the economy gradually recovers, says Gary Bradshaw, co-portfolio manager for the Hodges Equity Income Fund (HDPEX).
The $17 million fund, which garners five stars from fund rater Morningstar, has returned 14% in the past year.
Welcome to TheStreet's Fund Manager Five Spot, where top fund managers give their best stock picks and views on the market in a five-question format.
What is your view of the economy?Bradshaw: At the Hodges Equity Income Fund we remain encouraged that the U.S. economy will continue to recover at a tepid pace, yet gradually improve. We like what we see in the housing recovery and although unemployment will remain high it will get better. We think the U.S. market will be the best market to invest in 2013. Investors continue to sell their equity mutual funds and buy bond funds. Unfortunately, we think this is the exact opposite of what they should be doing. It makes no sense to us that investors continue to buy bonds at these anemic yields. Based on that outlook, what is your top stock pick? Bradshaw: Home Depot is our top pick. We look for companies with improving cash flow, growing earnings and increasing their dividends. HD benefits not just from the recent superstorm Sandy but also other past storms as communities continue to rebuild. All the foreclosed homes that are being fixed up and of course the housing recovery that is in the first inning will be a plus. We believe HD is taking market share not only from Lowe's (LOW) but also the local hardware stores. We think earnings will accelerate to $3.00 (per share) for the fiscal year ending Jan 2013 and $3.40 (per share) for the fiscal year ending Jan 2014 and HD recently raised their dividend by 12.5%. What is your top "sleeper" or "under the radar" stock? Bradshaw: It may be a massive company, but Johnson & Johnson is a sleeper stock when it comes to dividends It's now yielding an impressive 3.42%. This stock has not moved significantly for 12 years and all the product recalls last year have left a bad taste in investors' mouths.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV