Kevin Murphy, who jointly runs the £1.2bn Schroder Recovery fund, has identified undervalued stocks that have underperformed for so long they are now due a reversal in fortune and are a "once in a generation" opportunity for investors.
Mr Murphy said the sectors coming up as the cheapest right now are banks, miners and retailers.
Mr Murphy said "very few managers want to look at those sectors right now, they are unpopular, but that is where the opportunity is."
He said what investors need to do is separate those companies that are cheap, from those that are cheap for a reason.
Speaking at an investor conference in London yesterday (25 January), Mr Murphy said he regards Tesco as an example of a retail share he thinks is cheap for a reason right now, which is why he is instead invested in Dillards, a US retailer.
Mr Murphy said Dillards is different from most other retailers because it has a strong enough balance sheet to resist losing too much of its business to Amazon, and that even if it loses 5 per cent of its sales every year for the next five years, then the shares could still treble in value.
Among the banks held in the top 10 holdings in Mr Murphy's fund are HSBC, Royal Bank of Scotland and Barclays.
Speaking separately, Robin Geffen, who runs the £500m Neptune Balanced Fund, is another investor keen on mining and bank shares at the moment.
He said mining companies such as Glencore and Rio Tinto are undoubtedly cyclical businesses in nature, "but right now it is a sweet spot."
Mr Geffen regards the US equity market as the best "western" market.
He said he is particularly keen on the banking sector, owning Sillicon Valley Bank and JP Morgan.
Jonathan Davis, who runs Jonathan Davis Wealth Management in Hertford, has been increasing exposure to mining as he feels those assets do well when inflation increases, as it is now.
david.thorpe@ft.com
