Michael Levine
Oppenheimer Equity Income
Ticker: (F, Fortune 500)
Small and large pick: Dividends
Michael Levine says the American auto comeback isn't over. The industry is set to sell about 14 million cars this year -- a dramatic improvement from the lows of 2009 but still well below the peak of 17 million in 2000. "I think there's a lot of pent-up demand," says Levine, who has driven the $3.4 billion Oppenheimer Equity Income (OAEIX) Fund to 8.2% annual returns over the past decade. "The age of the fleet is at an all-time high; there are a lot of older cars out there that need to be replaced." On top of that, Levine thinks automakers will benefit as housing construction rebounds and contractors need to buy more pickup trucks.
Levine sees promise in the whole sector but says that Ford, which survived the recession without a bailout, is especially compelling. Its stock is trading at just eight times next year's earnings. Ford's shares have suffered because of skidding sales in Europe, but Levine thinks its results will improve as it shrinks its manufacturing capacity in the region. In the meantime the company offers a 1.7% dividend yield. Because it has a rock-solid balance sheet, he says, Ford has the wherewithal to bulk up its payout by at least 50% over the next year.
--M.K.
Beware of munis priced at bubble levels. They'll always pop in the end.
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