NEW YORK, NY (TheStreet) -- Citigroup (C) - Get Report, the best performer among global U.S. banks, will benefit more than Bank of America (BAC) - Get Report, JPMorgan Chase (JPM) - Get Report and other rivals as loan losses decline and emerging economies buy more banking services, said Oliver Pursche, a manager for the GMG Defensive Beta Fund (MPDAX) .
The mutual fund, started last August, has returned 2.6% this year. Citigroup's shares have risen 47% in the same period, Bank of America has gained 22% and JPMorgan has advanced 7.9%.
Citigroup posted a profit of $4.4 billion in the first quarter, the most since the second quarter of 2007. Fixed-income revenue increased, and Citigroup raised the value of subprime-mortgage backed bonds it holds, while writedowns on those types of securities in the past two years have caused net losses.
Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks and views on the market in a five-question format.
Are you bullish or bearish?
We are bullish on equities, select commodities and inflation-protected securities, and bearish on fixed income. The principal reason we are bullish on these areas is that we believe that infrastructure expansion, along with global demand and wealth shifts, are providing substantial growth and, as a result, investment opportunities.
Using a theme-based approach to investing leads to superior long-term investment results, all the while being able to avoid some of the more volatile areas of the stock market. Our outlook tends to be optimistic by nature, while being defensive by strategy.
What is your top stock pick?
In terms of what stock we believe could be the best absolute performer, Citigroup is it. The global financial sector is at the genesis of its turnaround. Within the financial sector, we look for global brands that have a strong management structure, improving fundamentals, in particular lower loan-loss reserves, and are in a position to capitalize on the growing wealth in emerging markets. Citigroup is ideally positioned for this.
What is your best "sleeper" stock choice?
. Although we believe the U.S. economy is recovering and will prove to be stronger than most expect, we also continue to see high unemployment. Dollar Tree offers an attractive product mix that is of value and interest to millions of struggling Americans.
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With over 3,800 stores, Dollar Tree fits perfectly into our economic outlook that calls for continued low interest rates, high unemployment and muted consumer spending.
What is your favorite sector?
The GMG Defensive Beta Fund is theme-oriented, not sector-based. One of the principal themes we are pursuing in the fund is global infrastructure expansion and rebuilding. As such, we are looking for stocks and commodities that will benefit from this theme. Base metals are a focus in our portfolio, and we are beginning to find attractive values in certain earth-moving and transportation stocks.
Which industry or stock would you avoid?
We are substantially underweight U.S. government bonds. We will remain in a historically low interest-rate environment for quite some time. Moreover, we also see continued high unemployment and a gradual increase in core inflation. The combination of these conditions should lend to strong stock and commodity performance, while being disadvantageous to bonds.
-- 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.