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Want a Housing Play? Try Cabinets: Fund Manager

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With the markets bouncing back and forth, it might be hard for investors to figure out where to find the best investment opportunities. Michael Sansoterra, managing director at Silvant Capital and portfolio manager of the Ridgeworth Large Cap Growth Fund, looks toward stocks in the consumer discretionary space, health care and industrials.

Within the consumer discretionary space, he likes Fortune Brands Home and Security (FBHS). Fortune provides products for residential homes. The stock rose an impressive 72 percent in the past 52 weeks, but has been giving back gains in the past month.

While the stock stats might not seem so promising, Sansoterra believes the residential renovation and remodeling metrics in the housing industry point favorably for Fortune Brands. He added that component costs—such as wood, copper, brass and steel—could help the stock.

RELATED: Housing Market: Healthy Growth, or in a Bubble?

Fortune Brands’ cabinets segment accounts for 37 percent of company revenue but only 14 percent of profits, but Sansoterra believes cabinets have the potential to be a far more profitable. He said that with the company’s recent acquisition of Woodcrafters, Fortune Brands now leads the fragmented market with 17 percent share. After the company took 40 percent of production off-line during the recession, the analyst said Fortune Brands’ incremental margins could rise from 3 percent in 2012 to 4 percent in the first quarter of 2013 to north of 10 percent in a year or two.

Shares of Masco, one of Fortune Brands Home and Securities biggest rivals, are also down for the past month after run higher.

Disclosure: Sansoterra owns FBHS through the fund.

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