While many investors focus on earnings, Validea CEO John Reese says that some of Wall Street’s best strategists prefer to use free cash flow when analyzing a company.
Recently, David Herro of Harris Associates spoke to CNBC about his thoughts on the Greece instability, and how that affects European investments — and the top fund manager’s outlook may well surprise you.
Top fund manager David Herro is finding a lot of value in the unloved European region, as well as in Japan. In a recent letter to his Oakmark International shareholders, Herro said he had about 80% of the portfolio in Europe and 11% in Japan. “How we are positioned is really a function of where we are finding individual-company value,” Herro tells Morningstar. “I think it’s really important to realize that a lot of these European and Japanese multinationals have revenue streams and cash flow streams that are really sourced from all over the world. I think that is one of the anomalies that we try to take advantage of. People were scared of Europe, so they stopped buying European equities, even though many of those European companies have exposure to good areas of growth in Asia, even in Latin America, where some of the growth exists. And so, really, this is why we’re positioned the way we are in some of these markets.”
Top fund manager David Herro says many European banks are looking like good investments right now, and that they are “well positioned to perform better” than US banks.
A number of the world’s top investment strategists recently gathered for Barron’s annual roundtable to offer their thoughts on where the economy and markets are heading. David Herro, Abby Joseph Cohen, Bill Gross, and Marc Faber were among those who participated, and overall the mood was subdued. “On the whole, they expect interest rates to stay unnaturally low, and the U.S. to lead the world in economic growth,” writes Barron’s Lauren R. Rublin. “Yet, they doubt that will translate into robust gains for the stock market. Scott Black’s expectation that the Standard & Poor’s 500 will return 10% this year — an 8% price advance and a 2% dividend yield — was as rosy as it got. Marc Faber, we feel compelled to warn you, thinks the market already has made its high for 2015.”
Barron’s also included one-on-one interviews with many of the strategists. In the clip below, Gross talks about his outlook for how the current global debt overload will play out, and discusses where investors should be looking right now.
Fund Manager Of The Decade David Herro says that, while they are causing short-term bumps, the decline in oil prices and reforms in China should help investors down the road.
Looking for places where the risk/reward scenario is most attractive? Top fund manager David Herro says Europe is the place to focus.