Large-cap stocks have been mostly undervalued relative to small caps and so there are still chances for investors to get in, said Mary Jane Matts, director of large cap value strategies at Fifth Third Asset Management. She discussed her best plays.
“There are still ample opportunities among the bigger cap, higher quality [names]—in particular, those that are self-funding as credit conditions are still tight,” Matts told CNBC.
Matts said as credit conditions in the current economic cycle are still tight compared to previous ones, companies that might rely upon bank lending, liquidity and fixed income available are “really disadvantaged.”
“You need to look at those that have strong free cash flow and balance sheets to fund their own growth,” she recommended.
As an example, Matts pointed to General Electric*. She said that while shares of GE “didn’t go off a cliff," the slide was nonetheless "a pretty big fall from grace.”
“Right now, it’s trading at below 12 times its normalized earnings level—if you put a standard multiple for GE on that, you’ve got maybe a 20 percent upside in that stock, and you don’t get opportunities like that in names that have good global expansion opportunities and have a very strong balance sheet,” she said.
- Watch Matts' Previous Appearance on CNBC (Jan. 21, 2010)
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No immediate information was available for Matts or her firm.
* GE is the parent company of CNBC and CNBC.com.