Portfolio Manager Perspectives

Jeff Benjamin

Marketfield's Michael Aronstein: More bounce for U.S. stocks

Jan 17, 2010 @ 12:01 am

By Jeff Benjamin

Strong domestic earnings over the next few quarters will add fuel to the charging U.S. equity market, said Michael Aronstein, manager of the Marketfield Fund (MFLDX). “I think the big surprise to people will be corporate earnings during the first half of 2010,” he said. Such robust corporate earnings, which began during the holiday shopping season, could attract more money from the sidelines and draw investors away from other hot sectors, Mr. Aronstein said. “If domestic stocks start to justify their performance with earnings, I would think the stock market will continue to rally,” he said. “And as that happens, some of the money in emerging markets and commodities is going to be at risk.” Mr. Aronstein, who manages $326 million for Marketfield Asset Management LLC, runs a “go-anywhere” strategy that is as close to a hedge fund as possible while still operating under the parameters of a registered mutual fund.

Such prospectus flexibility has allowed him to maneuver deftly through the extremes in the market since the fund's launch in November 2007, right around the time the S&P 500 hit a record high.

In November 2008, for example, the fund was loaded up with gold and gold company stocks to benefit from the sweeping “end-of-the-world panic.”

But by the end of last March, when the stock market was at its low point, Mr. Aronstein was positioned with the largest equity exposure in the fund's history at 70% net long, combined with a 22% net-long position in commodities.

His equity exposure is still more than 60% net long, but his allocation to commodities is now a slightly net-short exposure.

“There's too much affection for commodities right now, which is an aspect of the generally negative mindset toward the U.S. stock market,” Mr. Aronstein said.

He said that he will continue to focus on domestic sectors such as automobiles, regional banks, airlines and industrial conglomerates “until investors start to expect there is a reason for good stock market performance.”

In essence, Mr. Aronstein said, the sentiment is still way behind the stock market and the potential of a lot of U.S. stocks.

“Corporations are very liquid these days,” he said. “They don't need a [federal funds] funds rate at zero, but they'll take it.”

Since its launch, the Marketfield Fund has posted an annualized gain of 8.7%. That performance places it at No. 184 in the total universe of 17,484 mutual funds tracked by Morningstar Inc.

Among the 108 long-short funds, which combined for an average annualized decline of 3.1% over the period, the Marketfield Fund ranked fourth in the category.

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