* Sees Japan rebuilding to indirectly help U.S. construction
* Top tech picks include Apple, Google, EMC
* Sees energy sector gaining from demand for oil exceeding
* Underweight on financials, but likes JPMorgan, Goldman,
By Brenton Cordeiro
BANGALORE, April 6 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
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.
"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
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,
"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)