Oakmark Fund Chief: ‘I’m a Buyer Here’

Add David Herro’s voice to the growing "buy now” chorus on Wall Street.

Herro is chief investment officer of Harris Associates in Chicago. The long-term value investor manages a $20 billion portfolio, including the Oakmark International fund.

"I believe the U.S. economy is much stronger than what you hear on the street," Herro told Yahoo! Finance in an interview.

"I'm a buyer here."

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Among his holdings are several European banks, including Credit Suisse, Barclays and UBS.

"I think the credit crunch will end sooner than most of the pundits think," he said.

"The economy has within it the capability to self-heal," Herro said.

"So for every action, there's a reaction. It's not static. The economy is like a beast, it's like a human body … It's very dynamic. So when something happens to it, it just doesn't sit there. The seeds of destruction begin the healing process."

Financial pundits get caught up too much in what's happening today and what happened yesterday in the economy, Herro claims.

In fact, the economy’s dynamism is reflected in the current slowdown, Herro maintains, a slowdown he already talks about in the past tense.

"Undoubtedly, we went through a slowdown," he said. "We had to go through a slowdown. We're growing at such a rapid rate, at some point you cannot sustain four or five percent rate of growth for a developing economy."

Of course, too, the housing bust was inevitable, consider housing's long-term boom. "But these things will work themselves through," he said.

Asked about Credit Suisse, Herro's biggest holding in the Oakmark International fund which he manages, Herro said he's taking a big-picture view of the troubled investment bank.

Despite its problems, Herro said Credit Suisse is an extremely robust private bank. Over the last four or five months, Herro’s been increasing his holdings in the bank, which he said will provide stability during this rough period.

"Six months ago, [Credit Suisse] was a very small position in our portfolio,” he said.

Credit Suisse shares were up on the day of the interview after a decline over the last few months in the wake of big write-downs.

"When we talk about these write-downs, it's very important to distinguish between write-downs and write-offs … Write-downs are marked paper to market," Herro explained.

When the market comes back for these various leveraged debt obligations, he said, there could possibly be some write-backs, especially when the economy starts to stabilize. Write-backs would reflect a more favorable re-evaluation of previous write-downs — putting money back in the banks’ pockets.

Of investment banks in general, Herro said there's been some poor decision making, and some losses are inevitable, but understandable.

"The price destruction in a lot of these securities [has been over-done] … That has more than made up for the amount of value destruction."

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