NEWTON, Mass. (TheStreet) -- Visa (V) - Get Report and MasterCard (MA) - Get Report may be squeezed by tighter regulations, hurting profits, says Josef Schuster, who helps manage the Direxion Long/Short Global IPO Fund (DXIIX) .
The mutual fund is little changed since it was started March 1, as its rivals with long/short strategies have fallen 4%. Direxion is known for its leveraged exchange traded funds. Long/short funds enable managers to bet on declining, as well as rising, stocks, much like hedge funds do.
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.
Are you bullish or bearish?
We are neutral in the short-term as negative seasonal factors and negative news flow from Europe dominates. As we move towards the second half of the year, we are more bullish because we expect the message from strong U.S. economic data and solid earnings to outweigh continued negative news flow from Europe. This should be moderately positive for global stocks and should also point to good opportunities in global IPOs being issued at very attractive price levels. With regards to Asia, we believe that relative strength is building in China.
What are your two favorite stocks?
, a Japanese social-networking company and a valuation benchmark for U.S. social networkers such as
. This company trades at a low correlation to benchmarks and presents a truly unique sector exposure.
We also like
, a big brand and a recent IPO of a leading Korean insurance company at an attractive valuation. This continues to be a top pick despite the political overhang regarding North and South Korea, which may imply additional currency risk as well.
What is your top "sleeper" stock pick?
Amadeus IT Holdings
, a recent IPO in Spain of a leading global travel reservation system company. We like it because of its strong brand, diversified income stream and its attractive valuation. We expect this stock to eventually enter key benchmarks. This is the first significant European IT IPO in at least four years.
What is your favorite sector?
We are most bullish on recent U.S. IPOs or spin-offs in the consumer space with strong brands, such as
Dr Pepper Snapple
Which sectors or stocks are you avoiding and why?
We think it is wise to stay away from global alternative energy because we expect sector momentum may slow, enforced by potentially bigger-than-expected cuts in subsidies as a result of the European debt crises. And because U.S. credit reform is a big overhang, we would avoid global payment processing, such as Visa and MasterCard in America, and
-- Reported by Gregg Greenberg in New York.
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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.