FUNDVIEW-Fifth Third Asset upbeat on industrials, materials

Thu Apr 7, 2011 11:28am EDT

* Sees Japan rebuilding to indirectly help U.S. construction firms

* Top tech picks include Apple, Google, EMC

* Sees energy sector gaining from demand for oil exceeding supply

* Underweight on financials, but likes JPMorgan, Goldman, Morgan Stanley

By Brenton Cordeiro

BANGALORE, April 6 (Reuters) - With the U.S. recovery back on track, industrial and materials companies stand to gain the most for the role they play in keeping the economic engine humming, chief investment officer at Fifth Third's asset management arm said.

"This is going to be the area where you're going to get pronounced top-line revenue and earnings growth," said Keith Wirtz, who manages $17.7 billion in assets at Fifth Third Asset Management (FTAM).

Companies such as diversified manufacturer Parker Hannifin Corp and engineering company Fluor Corp should have a good exposure to the industrial recovery, he added.

"Stock selection is going to be a key thing and we've placed our exposures into the growth cyclical areas because we think that's where the market is going," he said.

Wirtz said U.S. companies also stand to indirectly benefit from the rebuilding efforts in Japan as a number of Japanese and Korean companies are expected to focus their energies there, freeing up projects in other parts of the world for some U.S. engineering companies.

"Fluor is going to be in a competitive stance to take over business elsewhere as Japanese companies focus on the domestic issue," he said. "Those that provide services and product activities to the infrastructure and engineering space are going to get business from all over the place."

Fluor Corp, the largest publicly traded U.S. engineering company, had a backlog of nearly $35 billion at the end of 2010 and is expecting 2011 to be more profitable than 2010.

Wirtz, who has been at the helm of Fifth Third Asset for eight years, also favors technology stocks as these companies have a predictable and visible growth for earnings.

His top picks include the likes of Apple Inc , Google Inc and data storage company EMC Corp .

"A company like EMC is well-positioned for the next 3-4 years," Wirtz said. "Corporations have really turned out and put forth a lot of data that needs to be placed, stored and dealt with in some way, shape or form; and in terms of capital expenditures, there's an above-average pace of spending in data centers particularly in data storage."

The 51-year-old chief investment officer believes Apple has just begun to scratch the surface of the enterprise market for iPhones and iPads and sees big opportunities in the space as more companies arm their executives with Apple's devices.

"We like Apple, and we think it's premature to harvest our profits," said Wirtz. "There's tremendous upside and there are segments of society that Apple's starting to tap that will drive their business."

Wirtz said he also likes the energy sector, and has companies ranging from oil and gas company Apache Corp to oil service giant Schlumberger Ltd and even offshore drilling contractor Transocean Ltd -- which was at the centre of the country's worst-ever oil spill last year -- in his portfolios.

"It's not something we're playing for this year. It's something we want to have as our portfolio representation for the next five years, and we think there's going to be tremendous EPS growth in the oil stocks," he said.

Over the next 3-5 years, oil will see an upward trend largely due to demand exceeding supply, Wirtz said.

The chief investment officer said he was underweight on financials, but liked select companies such as asset manager Blackrock Inc , banks JPMorgan Chase & Co and Wells Fargo & Co , as well as investment banks Goldman Sachs and Morgan Stanley .

Both Goldman Sachs and Morgan Stanley are at attractive price levels and will gain from the "pent-up" M&A activity, Wirtz said.

"We like Morgan Stanley. They don't have the stigma that Goldman has in the public domain, but they probably don't have the reputation of being so tremendous as a profit-creating entity as Goldman either." (Reporting by Brenton Cordeiro in Bangalore)

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