Macy's, CBS to Gain as Economy Recovers

Shares of Macy's and CBS will likely rise as the economy improves, says Patrick Dunkerley, manager of the Scout Mid Cap Fund.
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KANSAS CITY, Mo. (TheStreet) -- Shares of Macy's (M) - Get Report and CBS (CBS) - Get Report will likely rise as the economy improves, says Patrick Dunkerley, manager of the Scout Mid Cap Fund (UMBMX) - Get Report.

The $160 million fund, which has earned five stars from

Morningstar

(MORN) - Get Report

, has returned 35% during the past year, outperforming 74% of competing funds. The fund has gained 0.1% annually during the past three years, beating 99% of rivals.

Welcome to

TheStreet'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.

Are you bullish or bearish about U.S. stocks?

Dunkerley:

We are bullish. We think the big picture is still bullish because of the easy

Fed

and the recovering economy. However, there are still some near-term headwinds with the euro and all this concern over Europe. So investors really have to get used to the fact that the euro is a lame duck currency. It's probably going lower. As soon as investors reset their expectations, we think stocks are going to go higher.

Why do you like CBS, the television network?

Dunkerley:

We like CBS because it's levered to a U.S. economic recovery. It doesn't have a lot of business overseas, particularly in Europe. So we're focusing on good businesses here that are proven by the stateside fundamentals. CBS benefits when the advertising dollars blow into their coffers and that's happening with the improved economy. Better business confidence means increased spending on advertising.

Also, the Supreme Court removed restrictions on political advertising so we think additional advertising dollars can benefit the network. CBS is the last major independent network so we also think in the long term, it can get bought out. Finally, we think it's a cheap stock.

Another stock you like is Macy's. Aren't you worried about consumer spending drying up?

Dunkerley:

That's probably the bear case for most retailers. In Macy's case, it's really a company-specific story. They're improving the balance sheet by repurchasing debt, funding the pension. And they're also improving the merchandising through the "My Macy's" program. They're doing a better job of stocking their stores because they've upgraded their back office computer system. Overall, it's a better story at Macy's.

Why do you like Trinity Industries (TRN) - Get Report?

Dunkerley:

We think the major catalyst there is an improvement in the U.S. economy. Specifically, they are a leading manufacturer of rail cars and the railroads are becoming more profitable. They're getting more pricing power, and they're moving more freight as the economy improves, we think there's a railcar cycle ahead of us. They are going to order a lot more railcars.

Trinity is also a leader manufacturer of barges and wind towers. We think the economy lifts those businesses also. And once again, it's an inexpensive stock, which is very important to us.

You also like Host Hotels & Resorts (HST) - Get Report, the real estate investment trust. Is this also a stock pick that's levered to an improving American economy?

Dunkerley:

Absolutely. Business confidence is improving and that certainly leads to better economy. Leisure and business travel is picking up, and we think that's happening right now. Host owns luxury hotels like

Marriott International

(MAR) - Get Report

,

Ritz-Carlton

,

Hilton

and

Westin

in land-constrained markets. They own the hotels quite often in the downtown areas of cities. It's very difficult to add to the supply in such markets when it comes to the luxury hotel market.

--

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.