David Ellison, the financial sector fund manager who sidestepped much of the 2008 and 2009 market plunge by moving to a heavy cash position, is now seeing plenty of opportunity in financials — particularly in smaller banks.

“We’re in the process of going from ugly to OK in banking,” Ellison, whose two funds have handily beaten the market over the long haul, told Bloomberg. “If you ride the right horses, you will do all right.”

With the demise of former competitors, including mortgage companies that went out of business in the financial crisis, banks are earning higher profit margins, Ellison says. They’re also lending to borrowers with better credit. “This,” he says, “is the best time to be making loans I have seen in my career.”

Ellison also says the financial regulatory overhaul bill should have limited impact on smaller banks, because they don’t invest in hedge funds or deal in proprietary trading that the bill aims to limit.

Ellison also sees opportunities in larger banks. He “favors those with a large base of customer deposits, which provide the companies a cheap and stable source of funding,” Bloomberg reports.

A former Peter Lynch pupil who learned under Lynch at Fidelity, Ellison recounts a story of a time he “hesitated to tell Lynch to keep a bank stock in the portfolio because he didn’t like the company’s management,” Bloomberg reports. “Lynch listened to Ellison and replied, ‘But do you think the company is getting better?’ When Ellison said yes, Lynch decided they should hang on to the stock. ‘I learned a lesson,’ Ellison said. ‘People matter. Profits matter more.'”