Herro Focused on Fundamentals, Not Macro

While many investors are keying on macroeconomic factors these days, top fund manager David Herro says he’s sticking to fundamentals.

“People are afraid to stay focused on the fundamentals, so they are going to the macro,” Herro, whose Oakmark International fund is in the top 2% of its peers over the past ten years, the top 4% over the past five years, and the top 1% over the past three years, tells Morningstar. “The problem with that is the macro changes like the wind; it’s like the weather. There are so many variables, there are unstable coefficients, and people get whipsawed.”

The big swings caused by the market’s macro focus have created opportunities that Herro has jumped on, including some European financials. Morningstar reports that he’s also been buying back some of the stocks that he had trimmed in the third and fourth quarter of 2009. Sovereign debt fears this year made them attractive again. “In our view, not much has changed in terms of the fundamentals,” Herro says.

Another fund manager with a solid long-term track record, Scout International’s James Moffett, is also continuing to focus on fundamentals. He’s finding some internationally-oriented exporters in both Europe and Japan that he likes, according to Morningstar. He’s also cautious about hot emerging markets, saying they are “probably overvalued on a relative basis”.

Overall, Moffett is optimistic on the rest of 2010. “We think that the fourth quarter is going to be pretty good,” he says.

Send a Comment

Your email address will not be published. Required fields are marked *