GMO’s Jeremy Grantham says that U.S. stocks are not cheap, as many believe, but that international equities are looking more attractive.

“You’d lose a ton in U.S. small caps; but international small caps are fairly priced — right on the nose,” Grantham said at the Morningstar Investment Conference, CNBC reports. “If you put together a respectable portfolio of international stocks, you’d do much better.” In particular, he likes resource-related stocks like energy, metals, and food companies.

Grantham says abnormally high profit margins are skewing apparent U.S. equity valuations, providing an artificial prop to the market. “Think how weird profit margins are,” he said. “We’ve got high unemployment and financial crises — and world record profit margins. People think the American market is very cheap. We don’t. The market quite incorrectly gives full credit to today’s earnings.”