Emerging-Markets Telecom Seen Rebounding

Kirk Brown, manager of the American Beacon Emerging Markets Fund, expects shares of telecom companies in Latin America, China and Russia to gain as consumers increase spending.
By Gregg Greenberg ,

FORT WORTH, Texas (TheStreet) -- Kirk Brown, manager of the American Beacon Emerging Markets Fund (AAEPX) , expects shares of telecom companies in Latin America, China and Russia to gain as consumers increase spending.

The $141 million fund, which is rated three stars by

Morningstar

(MORN) - Get Report

, has risen over 78% during the past year, beating the 38% gain of the

MSCI EAFE Index

, a measure of foreign stocks. During the past three years, the fund has returned an average of 1.5% annually, better than two-thirds of its Morningstar rivals.

Welcome to

TheStreet's

Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks in five fast and furious questions.

Are you a bull or bear?

Brown:

We are long-term bulls. Given the strong performance in 2009, you can't rule out a market correction after such a strong rebound. The market appears susceptible to a pullback as investors digest the current state of the economic recovery and its potential impact on equities over the coming 12 months. However over the long term, we are bullish. The emerging market countries -- with younger populations, stronger growth rates, improved fiscal conditions and trade surpluses -- should allow these markets to outperform over the long term.

What is your favorite sector?

Brown:

We typically don't focus on sectors or countries. However, we are finding a number of attractive telecom stocks. The sector lagged considerably in 2009 and we are finding attractive growth prospects in wireless operators in Mexico, South Africa, India, Russia and China at value multiples. Additionally, we like consumer and domestic sectors as we feel that emerging market consumers with low leverage, excess savings and rising disposable income will gradually increase their spending.

What is your least favorite sector?

Brown:

While our focus remains on stock selection, we are underweight more cyclically sensitive sectors such as materials, commodities and industrials. These sectors have outperformed given the rebound in worldwide economic activity, but we believe that these sectors are more prone to underperform in a correction. We also question the sustainability of the strong rebound in economic growth as stimulus packages are removed and interest rates are increased.

Are emerging markets stocks cheap or expensive right now?

Brown:

While the emerging markets asset class reached historic lows in early 2009, given its strong performance in 2009, stocks are no longer cheap. However, despite the strong returns of 2009, stocks do not look exorbitantly expensive.

What is the biggest threat to your forecast?

Brown:

While we are expecting some pullback in economic activity once stimulus packages are removed and interest rates are increased, we are not expecting a double dip. A sharp or prolonged economic contraction would be a threat to the emerging markets asset class.

-- Reported by Gregg Greenberg in New York

.

Before joining TheStreet.com, Gregg Greenberg was a writer and segment producer for CNBC's Closing Bell. He previously worked at FleetBoston and Lehman Brothers in their Private Client Services divisions, covering high net-worth individuals and midsize hedge funds. Greenberg attended New York University's School of Business and Economic Reporting. He also has an M.B.A. from Cornell University's Johnson School of Business, and a B.A. in history from Amherst College.

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