DALLAS (TheStreet) -- Eric Marshall, a manager on the Hodges Small Cap Fund (HDPSX) - Get Report, says the economic recovery will benefit companies ranging from men's clothing retailers to dental-equipment makers.
The mutual fund, which buys shares of small companies, has returned 95% over the past year, compared with 66% for its rivals. The Hodges Small Cap Fund is up 8.7% this year, in line with its peer group.
Welcome to TheStreet.com's 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.
Kansas City Southern is the smallest of the Class 1 railroads, and they have greater growth opportunities than some of the larger railroads. They are highly leveraged to the recovery in manufacturing, and they're a potential takeout candidate.
This is a company that has held up in the recession better than many people had thought. The company has gone through a nice recovery in their business. They have been paying down debt. They recently initiated a buyback program, and they are benefitting from a new-product cycle of a softer mattress that's going to expand their market. And they also have 30% of their business internationally, which provides them with growth opportunities outside the U.S.
Will a rebound in the economy benefit JoS. A. Bank (JOSB) , a fund holding?
Yes, in an environment where you have a high unemployment rate set to get lower, formal dress becomes more important. JoS. A. Bank is an example of the strong getting stronger in retail. They have been a big beneficiary of gaining market share from department stores and other retailers going out of business. The company has been able to do that because they have a strong balance sheet. They have a substantial cash position, and we like the valuation at about 11 times earnings.
You also like Sirona (SIRO) . Is that a recovery play as well?
We see them as having some nice growth ahead of them. One big area of growth is from a new product on the market that essentially allows dentists to make porcelain crowns in their office through a milling machine instead of sending them off to a lab. The economics of this are much more attractive, and patients only have to come in one time to have a fitting done instead of having a temporary done and come back.
We like the valuation, and we think this is a stock that should do well as people start going back to the dentist. It's somewhat of a discretionary item where people can put off going to the dentist for six or 12 months during a recession but now they are returning.
We think it can. There is a big driver there from the whole popularity of 3-D movies. That's gotten people going back to the movies. This has been an area which has been underinvested in for a long time. And we see very good increases in ticket prices, traffic is up, revenue across the board is up and we like Cinemark and we think they will do well over the next four to five years.
-- 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.