Robert Loest, manager of the
Integrity Growth and Income Fund
, doesn't expect the U.S.
to rebound to past growth levels in his lifetime. He's avoiding
, rated three stars by
, is down 1% this year while the
S&P 500 Index
is flat. The fund dropped 13% annually, on average, in the past three years, outperforming the benchmark's 23% decline.
TheStreet.com'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 a bear?
I'm a bear short term and "mouse-ish" longer term. I worry that far too many investors believe that, with enough stimulus, we can get back to the level and kinds of spending and growth we had a few years ago, and are ignoring both the debt-service drag this will create for future economic growth, as well as the fact that most growth this decade was fueled by debt that must be repaid.
I don't think previous levels of economic growth will occur again in our lifetimes in the U.S. Investors would be better advised to buy stocks more like people did in the 1940s and 1950s -- for relatively secure income. We must stop depending on "yellow brick road of asset appreciation" as the primary driver of personal wealth in the U.S.
What is your top stock pick?
Loest: Becton Dickinson
boasts high and consistent free cash flows and returns on assets, and is 35% below our estimate of fair value based on discounted free cash flows.
They should be a major beneficiary of several major trends: aging populations in the developed world, an expanding middle class in the developing world and rapidly expanding new medical technologies, all of which will require more of the life-sciences research and laboratory-testing equipment and supplies they make. Instrument makers have never been the targets of government cost-control measures.
What is your top below-the-radar pick?
is a grocery store owner that caters to specialty and full-line value food shoppers. Concerns regarding the huge debt burden from their Albertson's purchase in 2006 and competition from
have taken the shares down over 60% in the last 18 months, despite the reliability of retail grocery stores as a non-discretionary part of consumer spending.
The company is getting debt under control, increasing internal efficiencies and return on invested capital, and recently raised the dividend, currently yielding over 4% and well-covered by high free cash flows. Our estimate of fair value is over $40.
What is your favorite sector?
We favor equipment and instrument makers for life-sciences research, hospitals and clinical laboratories. Populations in the developed world are aging and will require more medical care. Retiring Baby Boomers are likely to vote themselves the same kinds of huge expansion in Medicaid coverage that their parents voted themselves for expanded Social Security coverage.
New medical technologies will mandate increasingly new and more sophisticated test instruments for growing numbers of diseases and new tests.
What sector or stock would you avoid?
I'd avoid consumer discretionary retail or banking in any form. These sectors will not in our lifetimes see a return to the levels of growth or profitability to which we've become accustomed since the end of World War II.
Consumer spending, and therefore lending, will be constrained by much higher rates of debt repayment, saving and taxes, and by the need to spend a greater proportion of consumers' incomes on medical care, food, energy and other basic needs.
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.