Allianz Fund Favors Gas, Shuns Health Care - TheStreet

Allianz Fund Favors Gas, Shuns Health Care

Michael Corelli, co-manager of the Allianz OCC Opportunity Fund, is optimistic about the potential of natural gas, but remains cautious about health care stocks.
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NEW YORK (TheStreet) --Michael Corelli, co-manager of the Allianz OCC Opportunity Fund (POPAX) , is optimistic about the potential of natural gas, but remains cautious about health care stocks.

The fund has risen 62% during the past year, better than 94% of its


(MORN) - Get Report

small-cap growth peers. The Allianz fund has returned 5.3% annually, on average, during the past five years, better than 85% 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?


I am a bull. We have begun to see many signs from the market that are particularly positive. The market is differentiating between the performance and positioning of individual companies, which is very positive for active management. Valuations are starting the process of recoupling with growth rates, which is positive for growth investing. Access to capital in both the equity and debt markets has improved tremendously throughout the year, which is particularly positive for small companies.

Lastly, it would seem that investors are once again willing to adopt a slightly longer-term perspective. We can see the market discounting in the beginnings of economic recovery as we move into 2010.

What is your top stock pick?


One of our favorite names for 2010 is

American Public Education

(APEI) - Get Report

. We tend to have a somewhat contrarian mindset when it comes to small-cap growth investing and APEI falls squarely in that category. Throughout 2009, the education segment faced several headwinds, not the least of which was investors categorizing education names as defensive, counter-cyclical plays, during a year in which many of those same investors began to chase cyclicality.

While we don't dispute some of the industry's defensive characteristics, we believe secular growth drivers, such as the re-education of our adult workforce to achieve career advancement and remain globally competitive, are strong tailwinds for companies like American Public Education.

Because of poor investor sentiment toward the group in 2009, you have the opportunity to buy a company we believe could have 30% organic growth during the next three to five years at an extremely attractive valuation.

What is your top under-the-radar stock pick?


Our 2010 "sleeper" pick has to be


(INWK) - Get Report

. Here is an IPO from a few years ago that was growing so quickly during a strong economic environment that management didn't build up its business processes to a level it should have, and when corporate spending cratered during 2008 and 2009, InnerWorkings' business was hit hard.

The company functions as an outsourced print procurement broker to large enterprise companies, delivering its clients significant cost savings and better quality and transparency. InnerWorkings also acts as a trusted marketing partner to an extensive network of printing companies, which they use to fulfill their client's print jobs.

During the current economic downturn, InnerWorkings has focused on managing its business more efficiently, investing in people, products and processes, which we believe will translate into a meaningful opportunity to reaccelerate revenue growth and margin expansion as print spending stabilizes and begins its gradual recovery.

What is your favorite sector?


Without a doubt it's natural gas. There is tremendous consternation around oversupply of natural gas, and burgeoning efficiencies in finding and developing new supply. However, we think that argument is overstated considering today's commodity and stock prices. Specifically, there are a number of companies with low-cost, high-return, multi-year, repeatable inventories of unconventional natural gas, which is and will continue to be a growing share of U.S. natural gas supply for many years to come.

What sector or stock would you avoid?


I would say that health care is going to be a tale of two cities. While I wouldn't pan the whole sector and we are only modestly underweight overall, I think it is going to be a sector where you will have to be very careful from a stock-picking perspective. Certain companies are directly in the crosshairs of a rapidly socializing health care system and margins are going to remain under pressure as long as Washington allows it.

We are focusing our investments in health care behind companies that are either clearly part of the Washington-prescribed solution or are in niches that will be more sheltered from government intervention and control.


Reported by Gregg Greenberg in New York


Before joining, 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.