Jean-Marie Eveillard, who manages $33 billion in stock funds, is bullish on Japan and emerging markets in Asia.
He finds the U.S. less attractive because he believes Alan Greenspan engineered "the worst financial crisis since the Great Depression," as Eveillard recently told MarketWatch.com.
Eveillard, who manages four of Arnhold and S. Bleichroeder Advisers' First Eagle mutual funds, likes Japan's small-cap companies because of their heavy cash holdings.
"Cash and securities, net of liabilities, are in excess of market capitalization" for many of them, he says, which means investors are essentially getting a share of the core businesses for free.
Eveillard also recommends Japanese industrial companies, including pneumatic machinery maker SMC Corp.; Fanuc Ltd., which manufactures robots; and Keyence Corp., which produces automated products.
"All of them are multinational, have very large global market share, and are extremely profitable," while their share prices are "extremely modest," he says.
As for the emerging markets of Asia, that's where "the future lies," Eveillard says. "We have to adjust to the fact that that's where the action is going to be."
In particular, he will soon look at companies in India with his colleagues. "We'll get our heads together and try to figure out whether we like some of those businesses and whether the securities are available at reasonable prices," he says.
Eveillard sees value in emerging markets after their large drops over the past nine months. "I'm more impressed by Asia than by South America or Central or Eastern Europe, but we'll look there too."
The superstar money manager is still worried about the plight of the U.S. "The transition to a better economy may take quite a while and be quite painful," he says.
That's because 19 years of easy monetary policy under Greenspan pushed lenders and investors to take more and more risk, often with borrowed money. Greenspan's Fed sparked "one bubble after another," from technology stocks, to real estate to financial institutions, Eveillard says.
"When financial history is written five or 10 years down the road, Greenspan will be seen as the worst Fed chairman since the Fed was created in 1913."
Eveillard doubts the Ben Bernanke Fed will be able to revive the economy quickly. Fed policy will at best "postpone the inevitable," he says. The banking system needs to de-leverage itself in order to rebound, he says.
And that's why Eveillard isn't following some prominent fellow value investors, like Warren Buffett and David Herro, into banks and brokerage firms.
"Banks and brokerages are disguised hedge funds," Eveillard says. "There is no transparency. Nobody knows what's there."
While some commercial and investment banks already may represent bargains, "The problem I have is that if I bought them, I would be buying blind," Eveillard says.
One U.S. stock he does favor is American Express — for its steady fee business and depressed share price. "The financial sector is more than just banks and brokerage firms," Eveillard says.
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