NEW YORK (TheStreet) -- Michael Kass, manager of the Baron International Growth Fund (BIGFX) , is picking large companies in the banking, commodities and luxury industries tilted toward emerging markets.
As the U.S. struggles to lower debt, putting a drag on the economy, foreign stocks are poised to outperform, Kass says. Finance companies
, crop-protection company
, and jewelry and watch maker
are among his favorite choices.
The $47 million mutual fund, which was started at the end of 2008, has risen 14% this year and 16% in the past year, beating its rivals in the foreign small- and mid-cap growth category.
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.
Why will international stocks lead the way in 2011?
International economies are where the greater growth potential is, particularly in the emerging economies. It also happens to be where there is greater financial and fiscal flexibility, which doesn't really exist in many of the large developed countries like the U.S.
One stock you like is Standard Chartered, which has a lot of emerging-markets exposure.
Standard Chartered is fascinating. It was founded over 150 years ago to help finance trade flows within the former British empire. It's now grown up to become a leading bank to small and medium-size enterprises as well as large companies, and increasingly to consumers in the emerging world. They have relationships going back over 100 years.
You can invest in banks in China, but then you would be investing in a company that is conducting Chinese monetary policy. That's not something we are interested in. This company is run by sophisticated Western managers. They own the stock and they understand the allocation of credit. That's where I want to put my money.
In Brazil, you are a fan of Itau Unibanco. Why this bank?
This bank has a great position with consumers in Brazil. If you think about it, the governments are all trying to stimulate consumer spending. The way to do that is to drive credit penetration. This is the bank that's best positioned to do that, and they have the best management team in Brazil. So we are pretty excited about the loan-growth potential and their ability to grow earnings in the coming years.
Syngenta (SYT) , another holding, is getting support for its agriculture products.
Syngenta is a fascinating company. They are developing incredible intellectual capital. They are really in the business of agricultural yield improvement when you think about it. That's really important strategically because when people are wealthier, their eating habits change, particularly in Asia. They are eating more protein. More protein means you need more corn. More corn means there is pressure on yields, and companies like Syngenta can step in and help all those farmers.
You also like Richemontundefined, which owns the Cartier brand. In this sluggish market, can people afford Cartier watches?
Certainly people in places like China, Brazil and some of the other emerging markets can. In fact, there is an astounding increase in wealth creation in these places where there was no wealth five or 10 years ago. This is where the growth is. It's the engine driving Richemont. Half of their revenue today comes from emerging market consumers. They have the brands that emerging consumers want. You cannot recreate a Swiss watch brand or a jewelry design house like Cartier. There is no Chinese knockoff for Richemont.
-- Reported by Gregg Greenberg in New York.
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