Portfolio Manager Perspectives

Jeff Benjamin

No time to get defensive with investments, says this fund manager

MTB's Schultz likes energy stocks, not so hot on consumer staple sector

Apr 29, 2011 @ 3:11 pm

By Jeff Benjamin

Despite a number of challenges facing both the economy and the equity markets, this is not the time for defensive investing, according to Mark Schultz, manager of the $245 million MTB Mid-Cap Growth Fund Ticker:(AMCRX).

“Our reading of the macroeconomic environment is that being at the growthier end is the place to be right now,” he said. “At this point in the economic cycle, I'm just not that interested in defensive plays.”

Mr. Schultz admits that the “happy days of March 2009” are long gone and that investors have to be “a lot more careful” while investing in equities.

He added, however, that there are some positive signs for the economy.

“It's certainly tougher out there right now, but the preponderance of data point toward an increased recovery,” he said. “We're also looking at more-easy monetary policy from the Fed.”

The fund, which concentrates on companies with market capitalizations of between $2 billion and $15 billion, starts with a quantitative screening process that includes criteria such as high returns on invested capital, signs of sustainable growth, low leverage and a proven management track record.

A fundamental-research component goes into building the portfolio, which has about 80 stocks, with an average annual turnover rate of around 40%.

The fund currently has an 11% allocation to energy stocks, which is nearly double the 6% weighting by the benchmark Russell Mid Cap Growth Index.

“We're positioned for some long-term secular stories in the energy sector,” Mr. Schultz said.

Some of the energy sector positions include Peabody Energy Corp. Ticker:(BTU) and McDermott International Inc. Ticker:(MDR).

The portfolio is not exposed to utility or telecommunication sector stocks, and the fund is underweight consumer staples.

One of the consumer-related stocks he does like is Herbalife Ltd. Ticker:(HLF).

Since the start of the year, the fund has gained 12.5%, which compares with an 11.1% gain by the Russell benchmark.

The S&P 500, over the same period, gained 8.2%.

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.


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