$360 billion asset manager makes contrarian call on beaten group

Federated Investors is predicting the stock market is about to give investors a prime buying opportunity, with a beaten-down group leading the way.

"We think energy could work here in the back half of the year," Phil Orlando, the firm's chief equity strategist, said Monday on CNBC's "Trading Nation." "They [oil and gas companies] have been crushed, and that's why it's a very controversial call here."

His comments come as crude oil finds trouble trading above $50 a barrel, a level it hasn't reached since May. So far this year, the commodity has slid 17 percent.

Orlando, whose firm has $360 billion in assets under management, is making his bullish argument on energy based on geopolitics, not technicals.

He believes Saudi Arabia will do what it can to push crude oil prices toward at least $60 a barrel as it prepares for its massive Saudi Aramco IPO, its national oil company.

Plus, he says Russia also has a big interest in keeping oil prices higher. Its economy must show strength as the country enters a vital presidential election period. The election is scheduled for March.

"It would seem as if the potential for upside back into that $50 to $60 neighborhood in the second half of the year could give us some upside in the price of crude and the price of some of these energy stocks," he added.

He doesn't just see energy propelling the stock market higher.

Orlando, who has a 2,500 year-end price target on the S&P 500 (it closed Monday at 2,427.43), has an 8 percent equity overweight in his portfolio.

"The categories we like are the ones that we think will participate from stronger economic growth and stronger corporate earnings growth — technology, financial services, industrials, materials," said Orlando.

His bullish forecast does come with a caveat. Orlando said the odds are high that investors will see a 3 percent "hiccup" in the stock market this summer. But he argues it will generate an excellent buying opportunity.

"We're a couple days away from getting into second quarter earnings season, which we think will frankly be pretty good," Orlando said. "In terms of the underlying corporate fundamentals, we think that stock prices ought to continue to grind higher."

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Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

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