Emerging-Markets Stocks Off the Beaten Path

Editor's note: As part of our partnership with PBS's Nightly Business Report, TheStreet's Gregg Greenberg will appear on NBR Tuesday (check local listings) to highlight transportation stocks for the second half of 2011.

NEW YORK (TheStreet) -- Investors seeking off-the-beaten-path plays on growth in emerging markets may consider buying shares of Wabco (WBC) and Wynn Resorts (WYNN), says Jason Sheer, manager of the Roosevelt Multi-Cap Fund (BULLX).

The mutual fund, which garners three of five stars from Morningstar ( MORN), has returned 11% over the past year, putting it in Morningstar's 98th percentile for mid-cap growth funds. During the past five years, theRoosevelt Multi-Cap Fund has returned an average annual return of 4.5%, placing it in the 66th percentile.

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 is Wabco, which makes truck brakes and transmission systems, one of your favorite emerging-market investments?

Sheer: Wabco supplies safety products to commercial-truck markets including anti-lock braking systems and electronic stability control systems. Currently, in the emerging markets, there's about $300 in content per vehicle. Compare that with Europe, which is closer to about $3,000 in content per vehicle. Over time, as emerging-market trucks start to look more like developed-market trucks, there's tremendous potential for revenue gains for Wabco, which is supplying these markets.
Word on the Street

You are also a big fan of aerospace-component maker TransDigm (TDG). What's your outlook for this market?

Sheer:Transdigm is really about pricing power. Almost all of their products are proprietary and sole-sourced, which means there is very little competition for each of their products. All of this means that they are able to raise prices on a consistent basis. They were even able to do this during the heart of the recession, which really is a testament to the power the business model.

You are also seeing a rebound in traffic. The talk at the Paris Air Show which took place in June is that you are going to see a tremendous amount of inventory restocking by the distributors and the airlines so that should very much benefit the aerospace-aftermarket companies.

Does the fact that you own shares of Nordstrom (JWN) mean you are a big believer that the high-end consumer is in good shape?

Sheer: We think the high end is doing very well while the rest of the consumer base is facing troubles. Nordstrom very much caters to the higher end, so they have been doing really well. They've been putting through price increases with very little resistance. They are also very savvy from a technological perspective and with all of the dynamics going on in retail right now, the consumer is able to go into a store and comparison shop on their mobile phone. We think you need to be involved in a retailer with a very strong digital strategy and we believe that's the case with this management team.

If China's growth slows, as the country's policy makers want, how will this affect Wynn Resorts?

Sheer: That could have an impact, but I think you need to distinguish between a cyclical slowdown and a long-term secular change. Clearly, they have been trying to tighten monetary policy, and they want to tame inflation. We think once that happens, we get a resumption of economic growth. So you might see a short-term slowdown, but the long-term trend is very favorable.

And the growth has been amazing. Macau grew at 50% last year. It's growing 40% year to date, and there's massive infrastructure improvements going on in the Macau market currently. We think Macau will continue to grow very strongly over the next several years.

It's been about half a year since Rovi (ROVI) purchased Sonic Solutions. Can you update us on that company?

Sheer: Put simply, Rovi wants the value proposition of an interactive program guide in a world with a proliferation of channels. When there is one channel, there is no value to that program guide. You just turn on the television and see what's on.

With effectively thousands of different channels, however, the value proposition of a program guide that can efficiently tell you what you want to see just gets higher and higher. So Rovi has very strong secular tailwinds. The integration with Sonic is going very well. Its trading at 20 times forward earnings, which is reasonable for a company that we think grows its top line over 20% for the foreseeable future. So the stock is very interesting going forward.

-- Reported by Gregg Greenberg in New York.

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