BOSTON (TheStreet) -- John Slavik, co-manager of the Loomis Sayles Small Cap Growth Fund (LCGRX) - Get Report, says increased regulation will hamper financial companies in the near term, which is why investors should consider technology stocks instead.
The $132 million fund, which carries a three-star rating from
has risen 34% during the past year, outpacing the 32% advance of the
S&P 500 Index
. The Loomis Sayles fund has returned 4.3% annually, on average, during the past five years, better than 87% of rivals.
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?
We are bulls and believe that the market lows of last March potentially signal the beginning of a longer bull market advance. However, we do believe that 2010 will be a year of relatively modest returns as the market digests the strong bounce in 2009.
What is your top stock pick?
Our favorite stock is
, a provider of e-commerce fulfillment. E-commerce trends continue to be strong, representing an attractive growth in which GSI is gaining share. The business model has reached an inflection point where it will begin to demonstrate outsized operating leverage, which translates to strong cash flow trends.
What is your top under-the-radar stock pick?
Our favorite "sleeper" stock is
, a pharmaceutical company that addresses depression. The company already possesses very solid phase three data for a drug that will compete in a multibillion dollar industry. There is minimal Street coverage for this name, which has a management team that has executed in the past to the benefit of its shareholders.
What is your favorite sector?
Technology remains our favorite sector as we believe it represents new leadership in this bull market. Companies residing here possess superior growth prospects and balance sheets, along with seasoned management teams that navigated the technology downturn in 2001 to 2002. The stocks have demonstrated an appropriate "resting period" since that time, and have just seen the market come back to them over the past year.
What sector or stock would you avoid?
We feel that sectors facing the biggest headwinds are consumer discretionary and financials. Each of these has been disproportionately affected by macroeconomic trends. Specifically, consumer discretionary stocks will need to overcome the trend toward a higher savings rate as consumers attempt to repair their personal balance sheets.
Financials represented the epicenter of the disaster in the bear market of 2008 and early 2009, and will likely take time before investors return to them as a leadership group. Regulatory trends continue to work against them and create a lack of visibility.
-- 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.