SANTA FE, N.M. (TheStreet) -- Edward Maran, co-manager of the Thornburg Value Fund (TVAFX) - Get Report says Exxon Mobil (XOM) - Get Report and other oil stocks are trading at cheap prices and could rally as emerging markets grow.
The $3.7 billion fund, rated four stars by
, has risen 56% during the past year, beating the 38% gain of the
S&P 500 Index
. During the past five years, the Thornburg Value Fund has returned an average of 4.7% annually, while the S&P returned 1.3%. The fund outperformed 95% of its Morningstar peers during both time periods.
Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks in five fast and furious questions.
Are you bullish or bearish?
We are moderately bullish. There are headwinds to economic growth, but the combination of attractive valuations, cyclical economic recovery, and monetary and fiscal stimuli are too powerful to ignore.
What is your favorite stock pick?
Our top stock pick is Exxon Mobil. Exxon is well positioned for a variety of scenarios. If economic growth is robust, oil prices and refining margins should benefit and earnings could rise a great deal. On the other hand, Exxon is perhaps the bluest of blue-chip companies and if there is a flight to quality, it will be a major beneficiary.
While other oil companies cut their capital spending during 2008 due to concerns about capital availability and the price of oil, Exxon kept its spending intact. This positions the company for strong growth relative to peers. Its recent acquisition of XTO makes it a global leader in gas shale development, which further adds to the attractiveness of the stock.
What is your favorite 'under-the-radar' stock pick?
Our below the radar pick is
Life Time Fitness
. Life Time operates health clubs across a number of states in the U.S. They have created a new mousetrap in the industry, operating very large, high-membership clubs, with high-level service, and relatively low pricing.
The value proposition the company offers its customers was evident during the recent recession. While operating metrics were weak, the company held up much better than even we would have assumed, given the economic environment. As the economy recovers, Life Time should return to a growth footing. Life Time continues to have a long-tailed growth opportunity in front of it, and is what we consider an emerging franchise.
What is your favorite sector?
Our favorite industry right now is energy in general, integrated oil companies in particular. During 2009, oil prices rose more than 100%, yet the large oil companies lagged the S&P 500. As a result, these high-quality companies are trading cheap relative to their earnings, cash flows and asset values. The weak share prices of 2009 are particularly striking because emerging market stocks rocketed, and the outlook for oil companies is significantly tied to growth in emerging markets.
What sector would you avoid?
We would avoid the retail sector. The headwinds for consumer spending may endure for many years as borrowers find themselves with less access to credit and as consumers at all economic levels seek to raise their savings rates. Lower stock prices and lower home prices will create a wealth effect headwind. And extremely low interest rates squeeze retired people who seek to live on interest income. Retail stocks have rallied strongly and this may leave them vulnerable to negative surprises.
-- 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.