James Montier: Keep your powder dry
Acclaimed value investor James Montier sees danger and opportunity in the markets.
James Montier is one ofthe world's most famous value investors, says Finanz und Wirtschaft. So it's no surprise that his mainworry for now is that many stockmarkets are "revoltingly expensive".
Montier made his name as an investment strategist alongsideAlbert Edwards at Socit Gnrale,and is also an expert in behavioural finance. He is currently working for GMO, the investment management group.
The US market is practically in bubble territory, Montier says. Europe looks cheaper, but even there the periphery is no longer compelling value. There are pockets of excellent value in emerging markets, but the reason these pockets are so cheap is that they're "terrifying".
One is Chinese banks, which he daren't scoop up, given the scope for loans to turn bad. Russian energy stocks, on the other hand, he has been buying. They're ridiculously cheap, he says. Either the state will end up expropriating the shares, or they are worth a great deal more.
Korea is also worth a look. The government has been leaning on the chaebols, or big conglomerates, to up their dividends and ditch non-core businesses. The central bank may also take steps to weaken the currency, thus alleviating pressure on exporters beset by Japanese competition.
In general, however, Montier is content to keep 50% of his portfolio in cash and wait for setbacks on stockmarkets to throw up some bargains. As central banks have spent the past few years trying to blow up a new bubble, there should be plenty of those in the years ahead.