Tiffany Profit Boost Is 'Tremendous,' Investor Says

NEW YORK (TheStreet) -- Tiffany (TIF) will shine in the second half of the year and so will Accenture (ACN), says David Fingold, manager of the Dynamic Discovery Fund (DWGDX).

The mutual fund, which was started in April 2009, has returned 20% over the past year, putting it in Morningstar's ( MORN) 56th percentile for world stocks.

Welcome to TheStreet'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 do you like Tiffany? Is high-end spending secure?

Fingold: We really like the jewelry business. If you look at their stores in the United States, they are performing way below potential. That means there is a lot of room for their sales to return to their peak. The opportunity to raise prices and increase gross margins is also tremendous because there's little customer resistance to prices hikes. Gold and silver and diamond prices may be rising, but they pass those through to their clients.

Considering the stage of the so-called economic recovery, why do you like Accenture?

Fingold: I like IT spending and they are a gatekeeper on IT spending. As you know, there's always depreciation and there's a huge incentive for companies to invest in technology. We haven't had a real technology cycle since 2000. Accenture's the best-in-class player with the highest amount of consulting in their mix and the highest margins. They can even provide some of the lower value-added business from their base in India. They are a total service gatekeeper to major corporations that want to modernize, and they need to modernize now more than ever.

There are worries about fracking, a form of energy drilling, because of the release of chemicals. Yet, you hold Dresser Rand (DRC)?

Fingold: As far as natural gas is concerned, if you are going to produce it, you have to compress it to gas-line pressure. You simply don't have a choice. And the great thing about this business is not only that they sell compressors, but compressors usually come with a service contract. If that well is producing, you have to compress. Over half their pretax profit comes from service revenues. They have wonderful pretax profit margins -- close to 20%. They also have lots of upside with the new technologies they have developed for the fields off the coast of Brazil.

Is now a good time to own big assets such as airplanes, like Air Lease (AL) does?

Fingold: I would say "yes." If you look at the average age of the world's airplanes, you will figure out very quickly that they will reach the end of their usable life soon and that a significant number of aircraft will need to be replaced in the next 10 years. Then if you go and calculate how much equity is necessary to purchase those aircraft, you will see it's a multiple of the equity of the global airline industry. That means a company like Air Lease has an opportunity to lease these new aircraft and earn very attractive returns. Their pretax returns could exceed 20%, and they have seasoned management. These are the people who built up International Lease Finance Corp., which was the largest aircraft lessor in the world. They have wonderful relationships with Boeing and Airbus.

Over the past few months, we've actually seen a decrease in the prices of some metals. Why do you want to own Globe Specialty Metals (GSM) in this environment?

Fingold: Globe is the world's low-cost producer of silicon metal. They have their own mines. They have their own low-cost power and the demand for silicon metals has been really growing. They provide the silicon that goes into personal hair products like shampoo and it's been difficult to satisfy the demand. And, at the same time, the competition is seeing higher and higher costs as their energy prices have escalated. Globe's energy costs, however, have been protected by their long-term contracts.

-- Reported by Gregg Greenberg in New York.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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