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Here’s where a five-star manager is placing his bets

While there are some negatives weighing on the market, fund manager Brian Macauley has a favorable long-term outlook for equities thanks to good U.S. job growth and economic expansion.

However, the co-portfolio manager of the Morningstar five-star rated Hennessy Focus Fund champions being selective. These days, he's betting on autos and the consumer.

The fund's top holding is O'Reilly Automotive, a specialty retailer of automotive aftermarket parts.

"O'Reilly is the very best at getting parts to those customers in a very timely fashion and that is a critical competitive distinction versus their large competitors. And versus their small competitors they have much more buying power," Macauley said in an interview with CNBC's "Power Lunch" on Thursday.

O’Reilly Auto Parts
Source: O’Reilly Auto Parts

While the company currently has about 4,500 stores in the U.S., he expects that number to grow to around 6,500 in the next five to seven years.

Macauley also likes Hexcel, which is a relatively new position in the Hennessy Focus Fund. The composites company manufactures materials used in markets such as commercial aerospace.

He said it takes a lot of scale and a lot of customer familiarity to participate in the aerospace market, which Hexcel has along with just two global competitors.

Plus, newer aircraft are using more composites than in the past, so "as aircraft production ramps over the next several years it is going to pull a lot of revenue through Hexcel as Hexcel supplies those large manufacturers."

Another name on Macauley's list is Brookfield Asset Management, a Canadian-based investment firm that focuses on what he calls "real assets" such as commercial real estate, ports, toll roads, wind farms and timberland.

He believes there is significant opportunity for the company to grow its assets under management and has the potential for excellent returns in the future.

—CNBC's Stefanie Kratter contributed to this report.

Disclosure; Macauley and Hennessy Focus Fund own ORLY, BAM; Hennessy Focus Fund owns HXL.

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