The economy and stock market may continue to “muddle through” in 2013, but investors can still see significant returns in stocks like Intel (INTC) and Liquidity Services (LQDT), said Steven Rogé, portfolio manager for the Rogé Partners Fund (ROGEX). The large-cap blend fund, which garners two stars from fund-rater Morningstar, has returned 10% year to date.
Welcome to TheStreet’s Fund Manager Five Spot, where top fund managers give their best stock picks and views on the market in a five-question format.
What is your view of the economy?
Rogé: Economic growth will remain muted due to uncertainties including the European debt crisis and the fiscal cliff here in the U.S. We should see unemployment continue to improve despite this weakness as baby boomers begin retiring at a faster clip. If we see unemployment fall below 6% we will start to see inflation in wage growth and other areas of commodity prices.
What is your top stock pick?
Rogé: Our favorite stock right now is definitely Intel. Intel has a strong balance sheet, 4% dividend yield, and is heading into a replacement cycle with the new Windows 8 operating system. In addition, they are making progress in the mobile chip market which should help growth over the next few years. The stock has been battered of late and trades at a low 9.5x Price/Earnings ratio.
What is your top “sleeper” or “under the radar” stock pick?
Rogé: I suppose you could consider Liquidity Services our sleeper stock. Although expensive at 19x next year’s earnings, Liquidity Services is an emerging growth company with a long runway ahead of itself. They provide a marketplace for surplus and salvaged goods. Ever wonder where retuned or blemished goods go? Liquidity Services sells these items off much like eBay’s market platform.
What stocks or sector would you sell, or avoid right now?
Rogé: We are not very excited about utility stocks at this juncture. Many of these stocks are overvalued with investors chasing yield. No growth and high leverage; we recommend investing elsewhere.
What is your outlook for 2013?
Rogé: We foresee a continuation of what PIMCO calls “Muddling Through.” The slow growth will feel a little like a recession, but we should continue to increase GDP and lower unemployment rates. Housing process should continue to recover, albeit at a slow pace.