Glass Half Full for Corning, Teck Resources
NEW YORK ( TheStreet) -- Investors seeking high-quality stocks in the face of a weakening economy should consider Corning(GLW) and Teck Resources (TCK) , says Marian Kessler, co-portfolio manager for the Becker Value Equity Fund (BVEFX) .
The $144 million fund, which garners four stars from fund-rater Morningstar, has returned 9.2% in the past year.
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?
Kessler: The global economy continues to weaken as we approach year-end 2012, led by the recession in Europe, slowing commercial and industrial construction in Europe and China, the likelihood of higher taxes and austerity programs globally and widespread inventory destocking that will weigh on GDP growth in the months to come.
The U.S., Canada and Mexico appear to be ballasts; economic growth, while not robust, appears stable. All told, global growth will most likely weaken into the first half of 2013, exacerbated by the fiscal cliff and attempts by the U.S. government to reduce the burdensome debt created during and post financial crisis.
What is your top stock pick?
Kessler: We buy stocks that are out of favor but high quality, selling at attractive absolute or relative valuations and have an identifiable improving roadmap in the near to intermediate term.
We feel a strong commitment to each one of our individually chosen 60 or so holdings and thus run fairly equal weighted position sizes. However, a recent addition to portfolios is Corning. This company is one of the leading glass manufacturers in the world, developing and manufacturing product for display technology -- computers, laptops, mobile devices and life sciences.
The stock was under pressure in late 2011 and 2012 due to concerns about global demand for display, particularly televisions, as well as production over-capacity in China. Recently though, several Asian producers have announced shuttering of uneconomic glass plants and demand appears to be stabilizing after several quarters of decline. Corning is selling at a single digit P/E, is trading below a high quality book value, boasts a solid and cash rich balance sheet and produces strong free cash flow.
What is your top "sleeper" or "under the radar" stock pick?
Kessler: Teck Resourses, a Canadian metallurgical coal and copper company, is our top "under the radar" stock. With a $19 billion market cap, Teck is a large cap value stock, selling at book value, an 11x P/E, a manageable debt/capitalization of 28% and a cash hoard on the balance sheet of more than $4 billion. The stock is not well followed on Wall Street, despite its size and high-quality balance sheet. Teck is one of the world's largest miners/producers of metallurgical coal and has one of the all-in lowest cost of production and shipping among its competitors.