In 2011, Aronstein noticed that institutions were buying distressed single-family homes and achieving strong cash flows. Concluding that the housing downturn had ended, he bought home builders, such as Toll Brothers (TOL) and DR Horton (DHI). The move produced big returns.
Today Aronstein continues to own the home builders because he remains convinced that the housing revival has a long way to run.
"The construction cycle is just now getting under way," he says. "Residential construction is still well below what it was during the 2002 recession."
In 2011, Aronstein shorted emerging markets ETFs, a move that helped the fund outpace most competitors for the year. He is still wary of China and has a short position in iShares FTSE China 25 Index (FXI). In order to continue growing, China must boost its domestic consumption, a difficult task."In the absence of political freedom, China cannot make the transition to a consumer-led economy," he says. Another solid-performing fund is Pyxis Long/Short Equity (HEOAX), which returned 2.3% annually during the past five years, outdoing the S&P 500 by about a percentage point while recording much lower volatility. The fund currently has 26% of assets in short positions and the rest in longs. Shorting financials helped Pyxis outdo competitors during 2008. For his long positions, portfolio manager Jonathan Lamensdorf holds a mix of growth and value stocks. By staying diversified, he aims to deliver stable results. For his growth stocks, Lamensdorf favors companies with solid market positions. "We like companies with strong tailwinds and recurring revenue," he says. Holdings include Apple (AAPL) and IMAX (IMAX), the maker of theater projection equipment. Follow @StanLuxenberg This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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