Tags: Herro | stock | opportunity | value

Oakmark's Herro: Stock Decline 'Provides Opportunity for Long-Term Investors'

By    |   Friday, 17 October 2014 09:09 AM

Some investors are panicking in reaction to the S&P 500 index' 7.8 percent drop from its Sept. 19 record high.

But calm ones can take advantage of the opportunity to buy solid stocks at bargain prices, says star mutual fund manager David Herro of Oakmark International Fund.

"At the end of the day, when you value businesses based on free cash flow, the value of these companies has not dropped 10, 15 percent," he tells CNBC. "And that provides an opportunity for long-term investors."

Herro offered several recommendations. One is Kering, the French holding company for luxury brands, including Gucci and Bottega.

Kering's stock has dropped 15 percent in the last month. Herro sees it as a way to benefit from the growth of China's middle class. "As more Asian consumers march from middle class to upper middle class, they'll want to buy these nice Gucci and Bottega goods," he predicts.

Another stock he likes is BNP Paribas because it is well-capitalized and has a "solid residential franchise" and low losses on its loans. "One would argue that they're probably overcapitalized," Herro notes. "Again this is something that has dropped 20 percent in the last six weeks or so."

Other stocks he mentioned as value plays during the downturn include Toyota, Samsung, Diageo and Compagnie Financiere Richemont, a Switzerland-based luxury goods company.

Meanwhile, Stephen Schwarzman, CEO of Blackstone Group, believes financial markets have overreacted.

"We've got an overreaction going on because of health concerns and foreign policy concerns and all this stuff coming together that's just scaring people," he said in an earnings conference call, Bloomberg reports.

"There's this sense that we're out of control, and that's being reflected into markets. The U.S. economy is doing quite nicely."

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Some investors are panicking in reaction to the S&P 500 index' 7.8 percent drop from its Sept. 19 record high.
Herro, stock, opportunity, value
Friday, 17 October 2014 09:09 AM
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