Stephanie Link: 'I Like the U.S. Market'

NEW YORK ( TheStreet) -- TheStreet's Stephanie Link, co-portfolio manager of Action Alerts Plus, said that she "likes the U.S. market," noting that the Fed has been largely responsible for the growth the country is seeing.

Link pointed out that bank lending and housing are on the rebound and cited continued consumer resiliency, with healthy auto and retail sales. Companies continue to do more with less, and margins are not coming down, as the bears have thought. "That leads to better growth, and better corporate profits," Link said during her presentation. "If you can get a little bit better earnings, you could see a higher stock market."

Fund flows continue to be positive, with $91 billion into equity funds year-to-date, which is supportive of Link's thesis.

Not everything is great, though, Link noted. Jobs growth is still not up to where it should be, and manufacturing and ISM numbers have turned sluggish. If economic data does get better, TheStreet's chief investment officer said the Fed could start to taper soon. Although the markets would sell off on this news, Link said that would be a buying opportunity.

Link mentioned Procter & Gamble ( PG) and Phillip Morris International ( PM) as defensive names that are worth watching, as consumer staples have pulled back in recent days.

Housing is still in the early innings, Link said. Permits are up 26% year over year, and inventories are at 10 year lows. Some 48 states saw price increases in the month of May, something that bodes well for the housing market in the future. If rates continue to rise in a gradual, controlled way, that's okay, she added. Housing is a huge component of GDP, currently at 5%, but its derivatives account for nearly 17% of GDP.

Link mentioned that she likes Tile Shop Holdings ( TTS) on a pullback, as the company benefits from housing refurnishings and renovation. It has 3% market share, and is under the radar of companies like Home Depot ( HD), and Lowe's ( LOW).

She also mentioned Boise Cascade ( BCC), which recently went public at $21. The company, which restructured between 2005 and 2011, should benefit from the continued home renovation theme that's currently playing out.

Transportation is another theme which Link recommended during her presentation. Companies like Allison Transmission ( ALSN), which trades at 10 times earnings, would benefit from the replacement cycle that's currently going on. The company makes automatic transmissions, owns 77% of the market, and is highly correlated to the housing market. The opportunity for Allison is international, where it sees enormous opportunity.

Link also recommended Borg Warner ( BWA), which counts Volkswagen, Ford ( F), and Chrysler as some of its major customers. The company gets a significant portion of its revenues from Europe, which, according to Link, is bottoming. One name in the airline space she mentioned was Textron ( TXT), which has a business jet segment.

"There's a high correlation between corporate earnings and business jet demand," she said, noting that this will benefit Textron. "I think there's market share gains ahead for the company," she added.

Cybersecurity is a key segment in technology which excites Link. Security breaches and new government standards are increasing, creating new expense items for companies. Symantec ( SYMC), which recently announced a new CEO, is one company Link believes could benefit, as it undergoes a restructuring. "They are also changing their mix to more corporate enterprises and services," she said.

The financial sector is "the ultimate restructuring story," as banks cut leverage, raise capital, and credibility is restored to the sector, according to Link. Payout ratios are increasing, and she thinks they could go as high as 70%, up from a current 40%. If rates continue to rise at a steady rate,one name that could really benefit is M&T Bank ( MTB), which has done a great job of cost control and managing its book.

-- Written by Chris Ciaccia in New York

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