Tom Forester, whose Forester Value fund is one of the top performers in its class over the past 3, 5, and 10 years, says he thinks the recession is over, but that a “U” shaped recovery is more likely than a “V”.

“While our focus is on fundamentals, we leave room for the unexpected from those more creative than us,” Forester writes in his third-quarter commentary. “We expect a ‘U’ but leave room for a ‘V’. We remain cautiously optimistic.”

Forester, whose fund was the lone U.S. stock fund to make money last year, says he believes the recession has ended, but that he’s concerned about the post-recession rate of expansion. “We believe that company earnings, while still less than a year ago, will probably beat estimates, but that guidance could be soft,” he says. “We will continue keeping a keen eye on forward guidance to gauge company’s expectations of a ‘V’ bottom or ‘U’ bottom.”

Forester also offers some interesting — and sobering — views on banks. “While we think that home price declines are largely done (75% done?), we think that banks have only accounted for about a third of their eventual write-offs,” he says. The end of mark to market accounting has given banks an incentive “to not recognize the true market value of their mortgage holdings, both residential and commercial,” Forester says. “As long as a bank does not have to write down its assets, the earnings from new loans makes the bank look profitable.”

“If bank lending continues to stay soft we should expect to see a ‘U’ recovery,” he says. “However, more stimulus can bring forward economic activity as was seen in auto sales.”