NEW YORK (TheStreet) -- If the choice is between stocks and bonds, says David Giroux, portfolio manager for the T. Rowe Price Capital Appreciation Fund (PRWCX - Get Report), then stocks -- and especially consumer staples names such as Pepsi (PEP - Get Report) and Kellogg (K - Get Report) -- win hands-down.

The $9.9 billion fund, which garners a full five stars from Morningstar ( MORN - Get Report), is up 10% over the past year, better than 60% of its Morningstar peers. Over the past five years, the fund has returned nearly 5.5% annually, better than 92% of its rivals.

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.

Why are stocks more attractive than bonds right now?

Giroux: When we think about stocks versus bonds right now, the price-to-earnings ratio of the stock market is around 13 times; the P/E of the bond market using the 10 year as a proxy is at 40 or 42 times. And usually there has been a higher correlation between those two numbers. That said, while we don't see a lot of value in the bond market, we are not as positive about equities as we were two or three months ago.

One stock you like is Pepsi. Why do you like the beverage maker?

Giroux: I think you look at Pepsi and you see a lot of good non-U.S. exposure where they are growing very aggressively. The valuation is very compelling relative to its history and relative to the market. They pay a pretty good dividend yield. And finally there is pretty good visibility on their EPS growth through 2012.

Another consumer staples name you like is the Kellogg Co. Why this one?

Giroux: Kelloggs had some challenges this year with a recall, and sales growth has not been as strong as most investors would like, but this sets it up for very easy comparisons next year. The valuation is compressed from a premium valuation to one that is more in line with the food group, and we think there is potential over time that Kelloggs could be a takeover candidate as well.

You must really like cereal, because you also own General Mills (GIS - Get Report). Why?

Giroux: General Mills is actually the opposite of Kellogg, because they have been executing very well and investing aggressively back into the business. But the multiple still has compressed a little bit because it's a safe idea in a market that wants high beta. They pay a nice dividend yield and have very good management. It also has good high single-digit EPS growth. And potentially they will be a takeover candidate as well.

In the tech arena, you like Hewlett-Packard (HPQ - Get Report). They have had some management changes, to say the least. Why do you still like the stock?

Giroux: We are a newer investor in H-P. We invested in H-P post the Mark Hurd announcement. There is clearly hair on the name, but that hair is more than overly discounted in the stock trading at eight times earnings. And it is still a very attractive franchise on a long-term basis.

-- Reported by Gregg Greenberg in New York.

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