BOSTON (TheStreet) -- Dr. Finny Kuruvilla, manager of the Eventide Gilead Fund (ETGLX) - Get Eventide Gilead N Report, says he's finding strong prospects among health care stocks, such as Momenta Pharmaceuticals (MNTA) - Get Momenta Pharmaceuticals, Inc. Report and Genoptix( GXDX).
The $4.3 million mid-cap growth fund has risen 36% during the past year, outperforming the 29% advance of the
S&P 500 Index
. The 18-month-old fund beat more than half of competing funds during that time, according to
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?
If someone forced me to guess, I would say that the market is likely to be choppy in the near term as we digest lots of conflicting data. Longer term, I'm most worried about our political policies being too near-term oriented because major elections are never more than two years away. No one seems to have the grist to advocate for the real reform that we need, such as handling our ballooning debt. In life, it's rare that managing for near-term satisfaction is ever the best thing.
What is your top stock pick?
There are at least three or four that jump to mind right away. There's
, which makes paper products in environmentally friendly manner. They collaborate with groups like the World Wildlife Fund to make sure that they operate with best practices. The company has a very attractive valuation and trades with a free cash flow yield of over 20%.
A second is Momenta Pharmaceuticals, which came out of work from the Massachusetts Institute of Technology. They have perhaps the best technology out there for making generics of complex drugs. The Food and Drug Administration may soon be approving their first drug, low molecular-weight heparin, which would be a nice catalyst for the stock. And we badly need more competition in health care to keep drug costs down.
What is your favorite "sleeper" stock?
For a largely unknown sleeper, but a very interesting company, I'd name Genoptix. This is a rapidly growing and well-run company. When I was practicing medicine, I used to diagnose leukemias and lymphomas -- complicated material even for those who do it full time. Community physicians have a very difficult time with this because they may not have the volume or full-time attention.
Genoptix has an innovative model where oncologists send their samples to Genoptix where it is thoroughly tested, and physicians at Genoptix interact with the referring oncologist to explain the diagnosis. They fill a nice void in the medical system. About 7% of all leukemias and lymphomas in the U.S. are being diagnosed there, and the company could likely double that figure in the coming years. It's profitable, trades at a reasonable multiple, and has been consistently growing revenue by more than 30% annually despite the economic environment.
What is your favorite sector?
My favorite sector is definitely health care. In virtually any part of the economic cycle, skilled investors can find excellent companies with attractive risk/reward profiles.
I particularly like companies whose fortunes are not directly tied to the overall economy. Momenta is a great example of this because its future is tied to the FDA approval process, not to the health of the economy. This is exactly the type of building block that can improve the risk profile of a portfolio.
What sector would you avoid?
I would avoid the high-end consumer discretionary sector. While there will likely always be wealthy people willing to spend up, I think the recent Great Recession has produced a healthy fear for more people, which leads to more careful and measured spending. The team at
has been talking about a "new normal," which will be the wake of this recession, and I tend to agree. And if we have another leg down or can't repair our national budget deficit, that sector will only continue to suffer.
-- 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.