Your Money: Investing despite Washington's hand on the wheel

Washington drives the stock market right now. But the government's influence hasn't prevented portfolio managers like Christiana Trust's Scott Armiger from making smart investments.

This weekend, it was hard to get away from talk about the Federal Reserve. Larry Summers said he wouldn't seek the top job. Vice Chair Janet Yellen - considered likely to continue the Fed's current low-interest rate policies - is now considered the front-runner to replace Chairman Ben Bernanke. The Summers news buoyed the market Monday.

As chief investment officer at Christiana Trust, a division of Wilmington's WSFS, Armiger has been watching the Fed's bond-buying and other machinations with concern. He says good investors find quality companies no matter what's going on in government.

"Stocks have been on a good run since 2009, fueled by quantitative easing, which has created asset-price inflation. But for us, it's an opportunity to be more defensive as the market goes up," he says.

Armiger says his picks are not affected by who gets the Fed chair or by how much the central bank tapers bond-buying. "Wall Street isn't driving the market, Washington is," he says. "Still, we look at fundamentals, as long as we don't overpay. We've given up on Fed-watching."

Moreover, he says, long-term interest rates are starting to rise, indicating economic growth, "yet that's not putting people back to work in full-time jobs." Armiger's 2014 S&P 500 earnings forecast sees a gain of 4.5 percent, "assuming profit margins stay where they are."

For clients, Armiger recently sold some of the firm's industrial holdings that had hit their price targets, including Stericycle (SRCL), Danaher (DHR), and Equinix (EQIX). He's also overweighting health-care and consumer staples stocks such as McKesson (MCK), Covidien (COV), Amgen (AMGN), Thermo Fisher Scientific (TMO), and the exchange-traded fund Health Care Select Sector SPDR (XLV). He also likes Kroger, Walmart and CVS, and Costco. But he is underweight on energy and finance based on the slowing global economy and mortgage refinancing.

Among bank names the firm has held onto are JPMorgan (JPM) and Wells Fargo (WFC), and it has added Genworth Financial (GNW), based on new management at the insurance company. In energy, Armiger likes Ultra Petroleum (UPL), a shale-gas driller that is a pure play on extraction in Wyoming and the Marcellus Shale.

"I could see the stock at $40 in three years and $80 in five to seven years," he says. "It's a patience play."