Jersey City, N.J. (
) -- The flexibility to invest in companies of any size has helped the
Lord Abbett Fundamental Equity Fund
, which is managed by Deepak Khanna and Robert Fetch.
The mutual fund, which invests in small-, medium- and large-cap companies, has gained 3.1% annually over the past five years, besting 88% of its peers, according to
. This year, the fund is up 23%.
Welcome to the TheStreet.com's "Fund Manager Five Spot," where America's top mutual fund managers elaborate on some of their top investment picks.
Are you bullish or bearish on the stock market?
We are in the bullish camp. We believe the implementation of the remainder of the stimulus package, combined with increased corporate profitability, is going to help the economy grow 2% to 4% in 2010. Under that scenario of expected economic expansion, we are still in the early cycle of the recovery.
What is your top stock pick?
One of our favorite current positions is
, which is a large-cap company that sells a wide range of medical products. Abbott's revenues have grown 7% to 9% over the past few years, and the company is in the midst of a new product cycle, which should maintain that rate. The continued revenue growth should, subsequently, lead to 13% to 15% earnings growth over the next three to five years.
Abbott shares trade at a multiple of about 13 times estimated 2010 earnings, and with a price target of $65 per share over the next 12 to 18 months, we expect that multiple to expand up to 15 times.
In terms of potential health-care reform, I don't think we'll have too much clarity until the exact legislation is enacted. Abbott's product portfolio is well-diversified among nutritional supplements, pharmaceuticals and medical devices, so we think that the company is positioned to continue growing under the various possibilities of health-care reform that are being discussed.
What is your top "beneath the radar" stock pick?
Another name we like is at the other end of the market-cap spectrum.
Robbins & Myers
is a small-cap company that produces engineered devices for use in the energy, chemical and pharmaceutical industries.
We think Robbins & Myers will benefit from rising capital expenditures during the economic recovery, as well as the continued use of stimulus funding, which should start to impact its businesses in 2010. The company earned in excess of $2 per share in 2008, and we think it will return to that level in 2011 to 2012.
The stock has recently traded at a depressed multiple, and with the economic momentum behind the company, we believe the shares will trade higher over the next 12 to 18 months.
What is your favorite industry?
In whatever form it takes, one of the basic premises of health-care reform is to provide more uninsured people with health-care coverage.
We believe there are attractive investment opportunities in companies with products that can improve the quality of people's lives, as well as those companies that may experience the increased volume that could be generated by millions of more insured Americans.
Which sector would you avoid?
One sector that we are currently underweight is consumer staples. If we are in an early cyclical recovery, then consumer staple stocks will be laggards when compared with those in other sectors that could receive more of a boost from a strengthening economic recovery.
Unless we see the economy taking an unexpected downturn, we think that there are other sectors that offer more attractive valuations and returns than consumer staples.
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.