ALEXANDRIA, Va. ( TheStreet) -- Timothy Holland, co-manager of the Aston / TAMRO Diversified Equity Fund ( ATLVX), says cost cuts at Yahoo! ( YHOO) under Chief Executive Carol Bartz will help the Web-search company boost profit.The $11.8 million fund, rated four stars by Morningstar ( MORN), has risen 49% during the past year, better than half of its rivals. The Aston fund has returned 2.9% annually, on average, during the past five years, beating two-thirds of competitors. Welcome to TheStreet'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? Holland: We are bullish. While last year was strong, with above-average returns in the stock market, we remain bullish for 2010. We believe the recession is likely behind us with modest economic growth expected for the year. The recovery will likely be subdued as higher taxes at the local, state and eventually federal level act as headwinds against consumer and corporate spending. In spite of the potential for below-average GDP growth domestically, we believe even modest top-line revenue growth should lead to surging corporate profits as operating leverage takes effect. Furthermore, we anticipate consolidation to take place both domestically and globally as leading companies buy market share through acquisitions. What is your top stock pick? Holland: We really like the Advisory Board ( ABCO). This company provides best- practice research to over 2,700 member organizations, most of which are health care-related. The company offers about 40 programs to gain access to researchers who are on-call to investigate and report on the best ways common industry challenges have been addressed. Typical programs range from general management issues like IT strategy and physician leadership to business performance and benchmarking in areas such as revenue cycle and supply chain management.
The recent economic turmoil has interrupted Advisory Board's growth trajectory that has existed throughout most of the past decade, but we think health care reform is likely to increase demand from both existing and new customers. The stock is trading at 2.2 times sales; It fluctuated between 4 and 6 times sales between its 2001 initial public offering and the end of 2007. What is your top under-the-radar stock pick? Holland: Yahoo!. We are impressed with Carol Bartz's track record and her moves to focus and streamline the Yahoo organization. These assets have been significantly undermanaged, so it has taken longer than many hoped for the benefits to flow through the company's financial statements, particularly because the overall advertising environment has remained sluggish. Nonetheless, the company has enormous global "viewership" and valuable Asian assets. With a streamlined cost structure and better management direction, we think the company could return to revenue growth and improve profitability. Such a turnaround would be more dramatic if advertisers continue shifting a greater portion of their advertising budget online and broaden that spending into areas beyond search, where Yahoo appears best-positioned. What is your favorite sector? Holland: We are most bullish on the financial sector. While there was a dramatic lift off the bottom for many stocks within the sector, financials were mediocre performers in large cap and terrible in small cap last year. With a very steep yield curve, industry consolidation and bottoming in loan loss provisioning for the banks, profits could surprise on the upside and propel stocks in the sector.
What sector or stock would you avoid? Holland: We would avoid small-cap utilities. In general, we see too much leverage and balance-sheet risk within the space, particularly when one considers the significant capital requirements of running a utility on a day-to-day basis. -- Reported by Gregg Greenberg in New York.