Fund Gains From Financial Fallout: Five Spot

NEW YORK ( TheStreet) -- Ira Rothberg, co-manager of the FBR Focus Fund ( FBRVX), says some of the best opportunities are in companies that have a hand in finance but weren't dragged down by the market meltdown.

The fund, which Rothberg co-manages with David Rainey and Brian Macauley, has risen about 25% this year, almost 10 percentage points more than the S&P 500. Over the past year, the FBR Focus Fund is down 4%, better than 96% of its Morningstar peers.

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 a bull or bear?

Rothberg: We do not spend much time trying to predict short-term fluctuations in the overall market. We focus our efforts on finding companies with excellent business franchises, management and growth prospects. When we find these gems, we are very disciplined about the price we are willing to pay. So in most markets, there are few stocks that are in our sweet spot, but we are finding more opportunities than usual today.

What is your top stock pick?

Rothberg: O'Reilly Automotive ( ORLY) is a leading auto-parts distributor and retailer. The company fits our model, with clear competitive advantages, a great management team and a big market opportunity. Plus, the recent acquisition of competitor CSK Auto should boost value as it is integrated into O'Reilly's operating practices and culture over the next few years. O'Reilly has a long history of making highly accretive acquisitions, and our research shows that this should be another success.

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

Rothberg: One sleeper that we like is American Woodmark ( AMWD), a manufacturer of kitchen cabinets sold through Lowe's ( LOW), Home Depot ( HD) and new-home builders. We believe it has a good competitive position, a rock-solid balance sheet and trades modestly above book value. It is gaining market share from weaker competitors and is very cheap on our estimate of future earnings.

What is your favorite sector?

Rothberg: We don't benchmark versus an index so we don't look at the world through the lens of market sectors. We just look for the best opportunities wherever they may be. Today we see opportunity in companies that are feeling the heat from the financial crisis, but are not directly in the fire. Some examples in the portfolio are insurer Markel ( MKL), used-car retailer CarMax ( KMX) and auto-financing firm AmeriCredit ( ACF).

What sector or stock would you avoid?

Rothberg: We are long-term investors, so we look for businesses that we think have some predictability to them five and 10 years out. High barriers to entry, customer-switching costs and favorable industry structures help give us this confidence, and we generally avoid companies that do not have these characteristics. So we typically stay away from commodity, high technology or fashion-driven businesses, among others.
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.