NEW YORK (TheStreet) -- It may have taken longer than expected, but consumer discretionary stocks will soon reap the dividend from lower energy prices, says Doug Roman, portfolio manager of PNC's Large Cap Growth Fund.
"There has been some disappointment because the expectation was that lower energy would immediately translate into positive surprises on the consumer end," says Roman. "It happened slightly in the restaurant business, but not too much overall. I think it's coming in this quarter."
Roman's fund overweights consumer cyclical stocks, putting 21% of his assets in the sector versus a category average of 17% as of March 31, according to fund-tracker Morningstar. Aside from the leverage from lower gas prices, Roman also likes the wide range of consumer discretionary stocks which "run from the Dollar Store to Tiffany's, as well as homebuilders, automakers and travel."
The PNC Large Cap Growth Fund has returned over 6% so far this year, more than double the S&P 500 return of 2.6%. Roman's fund is in the top fourth percentile of large cap growth funds tracked by Morningstar over the past year.
Meanwhile, Roman says he continues to be underweight energy stocks after presciently lightening up on the sector last year.
"We went from having more drillers at the start of 2014 toward more integrated oils by the end of the year, which was more defensive," says Roman. "That's been helpful to us, but that trade is likely coming to an end."
And while Roman is a so-called 'bottom up' stockpicker, he does acknowledge the tailwind he is getting from investor preference for growth stocks over value in the past year.
"Growth has been beating value this year by more than 5% but that wide spread can't last forever," says Roman. "You are seeing a lot of negative revisions in growth sectors this earnings season."
Finally, speaking of earnings season, Roman says first-quarter results have been fairly strong thus far, but worries that the strong dollar's impact on foreign sales continues to mute investor reaction even to large earnings beats.
"We've seen an average upside surprise of around 5% and the average growth rate ex-energy is 5%," says Roman. "This is not as negative as a lot of people had previously thought. However, a lot of companies have missed on the revenue line, showing the difficulty they face from the strong dollar. That's really the big story coming out."