James Montier: Never Been More Bullish

James Montier at Societe Generale is smart, and has been a bear for some time. Over the last few months, however, he has become progressively more bullish, culminating with a note today saying he has “never been more bullish”. While that might seem praising with faint damns coming from a long-time bear, he seems to really mean it.

The Standard & Poor’s 500 Index is “distinctly cheap” because it trades for 15.4 times the 10-year moving average of its companies’ profits, compared with an average of 18 for the U.S. market since 1881, London-based Montier wrote in a research note today. Fifteen stocks in the U.S. index, from Chevron Corp. to Gap Inc., pass his test for “deep value,” while a tenth of shares in Europe and a fifth in Asia qualify.

“This is a value investor’s version of heaven,” wrote Montier, SocGen’s global equity strategist. “From a bottom-up perspective, the equity market is offering some excellent companies at truly bargain prices for those with the fortitude to shut their eyes, or at least switch off their screens and buy.”

Corporate bonds are pricing in the highest default rate since the Great Depression and some senior secured debt is trading for as little as 50 percent what investors would recover in a bankruptcy, Montier wrote. The drop in bonds may amount to “the investment opportunity of a lifetime,” he said.

More here.