NEW YORK (
) -- Dennis Guenther and Robert Jergovic, managers of the
AdvisorOne Amerigo Fund
, are bullish on stocks in emerging markets, especially Brazil.
The Amerigo Fund, which is rated four stars by
, has risen 37% this year, beating 91% of its peers and the 13% advance of the
S&P 500 Index
. It has gained 2.7% annually, on average, during the past five years.
Welcome to TheStreet.com's Fund Manager Five Spot, where America's top mutual fund managers share their investment views in five fast and furious questions.
Are you a bull or bear?
The markets remain in somewhat of a sweet spot, benefiting from both monetary and fiscal stimulus, low interest rates and inflation, and improving corporate profitability. We remain bullish, but less so, now that valuations of both equities and corporate bonds have recovered from the extremes we witnessed last fall.
As the "Great Reflation" theme continues to play out, we have begun to trim back our positions in commodities and also some emerging markets because of the outsized gains experienced by the asset class.
Over the intermediate term, for the markets to maintain their vigor, we will need to see a self-sustaining economic recovery take hold. A recovery that is too fast will aggravate the "bond vigilantes" concerned about potential inflation. A recovery that is too slow will not be well received by the equity market. A self-sustaining, moderate recovery that is not in need of further stimulus programs would represent the sweet spot for 2010.
Are you bullish on any particular regions?
We are overweight Latin American/Brazilian equities. While several of the emerging markets are benefitting from the increase in commodity prices, Brazil has been in a sweet spot, thanks to its strong demographics and continued movement toward pro-business initiatives. We believe that Brazil should continue to benefit from a global recovery as demand for raw materials will remain firm. The recent announcement of Brazil hosting the Olympics also serves as a continued confirmation that it's becoming a stable nation.
What area has been overlooked?
One particular area that has shown some improvement and resiliency is U.S. large caps. These multinational companies have been able to adapt to the changing needs of the global consumer. With many of them deriving significant revenues outside of the U.S., they continue to supply goods that the world needs as the economy stabilizes and rebounds.
What is your favorite sector?
Technology. We continue to be attracted to the long-term secular story for technology. The sector benefits not only from solid balance sheets, but from an ability to grow revenues in a potentially slow-growth environment. This, combined with the sector's price momentum and positive earnings estimates, has led us to overweight the sector.
What sector or stock would you avoid?
Consumer discretionary. While the sector has experienced its traditional post recession relative outperformance, we are presently underweight the sector. We remain concerned that, until consumer balance sheets have been deleveraged and employment begins to firm, the likelihood of a strong "V"-shaped recovery in spending behavior on the part of U.S. consumers will be remote. Valuations for the sector are now above their five-year average, while dividend yields approximate that of the broader market. Despite our concerns, the sector does not appear undervalued at this time.
-- 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.