JPMorgan Is Best of Breed: Fund Manager

BOSTON ( TheStreet) -- As some investors in JPMorgan Chase ( JPM) will follow the bank's fourth-quarter results, due Friday, to see if there's a dividend increase, Robert Bacarella says the bank's outlook is of greater importance.

Bacarella, manager of the Monetta Young Investor Fund ( MYIFX), purchased JPMorgan along with Bank of America ( BAC) and Citigroup ( C) as a package on expectations the banking sector is on the mend. JPMorgan "is the cream of the crop," the manager said.
JPM

"We're starting to see an improvement in earnings after the whole episode in 2008 with the financial crisis," he says. "We pay attention to price movement as a leading indicator. We're seeing increasing buying coming into the banking sector from institutions. We're seeing price movement that is beginning to exceed six-month highs. Plus, the outlook is beginning to improve."

JPMorgan is the fund's top pick in the banking sector, and Bacarella expects the stock to easily outpace the broader market this year. For the Monetta Young Investor Fund, that's a critical characteristic when it comes to portfolio management.

The Monetta Young Investor Fund's key objective is to beat the return of the S&P 500, which it accomplishes by investing about half of its net assets in funds that track the S&P 500. The remaining assets are devoted to industry leaders with highly recognizable brands. In addition to JPMorgan and the other bank stocks, the fund counts Apple ( AAPL), Ford ( F) and Google ( GOOG) among its holdings.

In terms of performance, the Monetta Young Investor Fund performs as intended. The fund has average annual returns over one and three years (23.7% and 10.7%, respectively) that handily beat the S&P 500 (12% and minus 15%, respectively). Since its Dec. 12, 2006, inception, the fund has an average annual return of 9.1%, compared with a 10.8% decline for the S&P 500.

Although Bacarella expects JPMorgan to outpace the market in 2011, he acknowledges that he has concerns as the bank preps to release its fourth-quarter financial results. In particular, Bacarella is cautious in his enthusiasm about what JPMorgan CEO Jamie Dimon will offer in terms of business outlook.

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