In a wide-ranging interview with Fortune, top fund manager David Herro talks about why he’s loaded up on European financial stocks, and offers some interesting insights about his longer-term investment approach.

“Eventually they’re going to get these problems solved,” Herro says of Europe. “If you look at the economic history of the world, problems come and problems go. There are problems, and they do have to be dealt with. And our view is that all these problems are manageable.”

Herro says that many European financials have solid financials and fundamentals, but investors are letting macroeconomic fears skew their views. “Trying to predict the macroeconomy is extremely similar to trying to predict the weather,” he says. “You can’t let the last storm impact the way you see the future. This is exactly what the investment community does, and it shouldn’t do — it gets obsessed with macroeconomics, and it ignores microeconomics.”

One interesting note on Herro’s broader investment approach: He says the price/earnings ratio is a “useless measure”; instead, he prefers to look at the free cash a company is generating.

Herro says the key to investing in European financials “is to focus on those financial institutions that have diverse streams of income, good capital positions, and well-costed operations.” As for the macro fears, he says, “This market is the most conducive for bottom-up investing! Everyone is so concerned about the macro overlay that you have panic buying and selling of certain sectors and regions, which means there is so much inefficient pricing that we as bottom-up investors can exploit.”