Five Top Managers Are Buying — Cautiously

Noticing a trend that we’ve picked up on in recent weeks, Fortune notes that several extreme value investors have begun to see good, safe buys in the current market. In an interview with the magazine, top fund managers Robert Rodriguez, Susan Byrne, Jeremy Grantham, Tom Forester, and Leslie Christian all tell Fortune that they’re seeing a attractive stocks in the market right now — though they all remain somewhat cautious in this unprecedented environment.

Rodriguez, who had been holding a good amount of cash in the past couple years because he believed the market was overvalued, said his screening system is now finding more good values than it has in over six years. Back in June 2007, only 33 of 10,000 stocks qualified, he said, but in mid-October of this year that number had reached about 450. Rodriguez says his funds (First Pacific Advisors’ Capital and New Income) have in particular been buying up energy stocks like Patterson-UTI, Ensco International,and Newfield Exploration. But he says he’s still being “very cautious, because what we’re experiencing now is a major shift, the culmination of failed policies in the regulatory system and the private sector that have been building up for 30 years.”

Byrne says her firm, Westwood Holdings Group, is focused on high-quality, low debt, dividend-paying companies that sell below the market P/E ratio. That has led her to tech and energy stocks, and even some bargain blue chips like McDonald’s. GMO’s Grantham, meanwhile, agrees that high-quality names have become bargains, citing Coca-Cola, Procter & Gamble, Microsoft, Wal-Mart, and Johnson & Johnson.

The five fund stars offer a number of other picks, and some interesting commentary — including Christian on why Coca-Cola could face problems despite its huge name recognition and beaten-down price, and Grantham on why his firm decided years ago that no banks could ever be considered “high-quality” stocks.