ARLINGTON, Texas (TheStreet) -- Samuel Saladino, manager of the Epiphany Fund, says health-care stocks such as drug distributor AmerisourceBergen (ABC) - Get Report may be big winners in 2010, while he's avoiding materials shares.

The mutual fund, which garners four out of five stars from

Morningstar

, has returned more than 32% over the past year. Over the past three years, the Epiphany Fund has fallen an annual average of 5.7%, better than 72% of its Morningstar-tracked peers.

Welcome to TheStreet.com's Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks and views in five questions.

Are you bullish or bearish?

Saladino:

Long-term bull but short-term cautious. Equities are reasonably valued -- even attractive -- when you compare earnings yield to fixed-income yields. The worst of the financial crisis and recession are behind us. Companies have been forced to address costs and efficiency, and should produce good earnings leverage as the U.S. and foreign economies recover.

Many economic indicators are strengthening, and monetary policy is accommodative worldwide. I've been a little cautious short-term as I expected earnings, and especially revenue, to recover a bit more slowly than the market appeared to be pricing starting in April 2009.

What is your top stock pick?

Saladino:

AmerisourceBergen has been a steady performer. Its revenue grew overall through the recession, with only slight declines in a couple of quarters. Year-over-year earnings per share have consistently increased for several years. The company has maintained steady margins in this low-margin business, but better asset utilization has led to increasing return on assets and return on equity. EPS and revenue forecasts are showing strong upward trends.

The company is currently benefiting from expanded use of generic drugs, a trend that should continue due to ongoing efforts to reduce health-care costs and with several high-volume drugs facing patent expirations.

Another favorite,

TJX Cos.

(TJX) - Get Report

, saw significant revenue growth in 2009 as consumers became more value-conscious.

Sales were 8% higher in 2009 than in 2008, and were up 20% year-over-year in December. Same-store sales were up 6% for the year and up 14% in December. While gains in 2010 will be more difficult, prolonged economic challenges like elevated unemployment and underemployment, reduced household net worth and continued uncertainty should keep consumer interest in bargain hunting high. Good inventory management has led to both higher asset utilization and higher margins, though this could be difficult to sustain if consumers return in strength to higher-end retailers.

What is your top "sleeper" stock pick?

Saladino:

Dover Corp.

(DOV) - Get Report

is a relatively under-followed mid-cap stock. This diversified manufacturer offers products to the construction, agriculture, energy, communications and chemical industries, among others around the globe.

The company is well-positioned to benefit as economies improve. Bookings and backlog are increasing, up 9.8% and 6.4% sequentially last quarter, so earnings visibility is better than for many manufacturers, and the company has been increasing guidance. Cash generation remained healthy throughout the recession. Earnings and revenue have declined from a 2008 peak, but are moving up again.

What is your favorite sector?

Saladino:

The health-care sector is appealing. Valuations are quite attractive. On a price-to-earnings basis, both forward and trailing, the sector has the second-lowest ratios for the overall sector of the 10 GICS sectors within the

S&P 500

, with utilities having the lowest sector P/E ratios.

Growth in the overall sector is hampered by major pharmaceuticals, but other parts of the sector expect solid growth. The sector has been depressed by uncertainty over health-care reform. While there still may be political challenges for some companies in the sector, there are many firms that should be unaffected by, or even benefit from, any political action, and whose valuations are currently quite attractive as the market has been discounting the entire sector.

Which sector or stock would you avoid?

Saladino:

We are invested in all sectors, but materials probably makes me most nervous. The sector is relatively expensive, as should be expected because of the cyclicality of most of these companies. However, if global economies recover slowly, these cyclical valuations may be too high even based on trough earnings. Also, the volatility of commodity prices makes earnings projections and, hence, valuation judgments difficult.

-- Reported by Gregg Greenberg in New York

.

Analyst David MacDougall is hosting a live chat in the Stockpickr Forums today, March 4, starting at 10 a.m. EST, to discuss health care stocks, including big pharma and the insurers. Log in or sign up at Stockpickr to submit your questions!

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.