Five Spot: Legg Mason Bets on Renewables

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BALTIMORE ( TheStreet) -- Brian Angerame, manager of the Legg Mason Partners Capital Fund ( SACPX), says Shaw Group ( SGR) and Covanta ( CVA) are attractive long-term stock picks as America focuses on renewable energy.

The fund, which gets Morningstar's second-highest rating of four stars, has risen 15% this year, better than 99% of its peers. Over three years, the Legg Mason Partners Capital Fund has lost an annual average of 8.1%, compared with a drop of 9.5% for rivals.

Welcome to TheStreet.com's Fund Manager Five Spot, where America's top mutual fund managers give their best stock picks in five fast and furious questions.

Are you bullish or bearish?

Angerame:We are bullish because we are still finding stocks to own. That said, we do not have high hopes for the market as a whole over the next quarter or two. The market had a strong rally driven by the healing of the credit market and the "green shoots" which began to appear in the early spring.

In order to have a strong rally from here, we are going to need to see some of those green shoots flower and bear fruit. That will be difficult while corporations are right-sizing their businesses and consumers are paying down debt. Longer-term, we believe that individuals and corporations with better balance sheets will be better consumers and borrowers, and that will be healthy for the U.S. economy and the U.S. equity market.

What is your top stock pick?

Angerame:Shaw Group is an engineering and construction company that does everything from rebuilding the levees in New Orleans, to bending pipe for refineries and power plants. Shaw will benefit from the resurgence in demand for nuclear power both here and abroad. We didn't buy the shares because Shaw will be helped by the Obama administration, but more than likely, nuclear will be part of the plan to meet the world's renewable energy needs.

What is your top "beneath the radar" stock pick?

Angerame: Covanta is a leading waste-to-energy company. Covanta contracts with municipalities to accept its garbage, burn it and make electricity. We think waste-to-energy will also be part of the solution, because of its more carbon-friendly electricity production. We also believe that Covanta may be a beneficiary of the renewable energy legislation in Congress right now.

What is your favorite sector?

Angerame: We tend not to take huge sector bets, and thankfully we are finding attractively valued stocks in several sectors including technology, industrials, energy and health care. Now is not the time to be throwing darts, however. We believe stock picking is essential, especially after the rally off the March 9 lows.

What sector or stock would you avoid?

Angerame: We are having a hard time finding attractively priced consumer-staples stocks right now. It appears that many equity investors have positioned themselves very conservatively, which has created demand for "safe" consumer-staples stocks. We are finding more attractively priced stocks outside the staples sector.

-- Reported by Gregg Greenberg in New York. Feedback can be sent to gregg.greenberg@thestreet.com.

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.

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