Herro on the Bond/Stock See-Saw

Oakmark’s David Herro, a Morningstar Fund Manager of the Decade, says that while investors have been loading into bonds in recent years, he’s beginning to see a shift back toward stocks.

“At some point, and I think we’re already starting to see some investors budging, you will see movement out of bonds and into equities, which when you look at earnings and cash flow appear extremely underpriced versus bonds,” Herro tells Bloomberg’s Tom Keane. He adds that it’s far from too late to shift back toward equities. “Picture a teeter-totter, and if you think of the fat kid being all the people in safe places like bonds, that teeter-totter is all the way down to the ground,” Herro says. “Up on top is equities, and at some point that teeter-totter’s going to start moving.”

Herro also discusses how he’s succeeded where so many investors have failed in recent years. “I think the big problem investors have today is A, they lack patience, and B, they are too afraid to buy low and to sell high,” he says.