Fund management icon Bill Miller says stocks are undervalued, particularly shares of the 10 biggest companies in the Standard & Poor’s 500 Index.
“I think there's a lot of value in the overall market right now,” he told CNBC.
That’s because the economic recovery has just begun, Miller says.
He expects GDP growth to have totaled 4 percent in the fourth quarter, and he sees the economy expanding as much as 4.5 percent in 2010.
Corporate profits will soar 25 percent this year, Miller predicts.
He has made his name running Legg Mason Capital Management Value Trust. That fund beat the S&P 500 for 15 years in a row.
The 10 biggest stocks have room to rise because they now have a price-earnings ratio of 12, but should be at 14 to 18, Miller says.
He particularly likes IBM, JPMorgan Chase and General Electric.
“IBM is a classic example,” Miller said.
It trades under 12 times this year's forecast earnings at the same time the company is registering record profits.
As for GE, which cut its dividend 68 percent last year, Miller thinks the company will restore it within the next couple years.
Many experts have turned bearish on stocks in the wake of President Obama’s proposal to restrict big banks’ risk-taking activity.
"I think there's a belief that this bank plan is not necessarily going to help investors," Gary Webb, CEO at Webb Financial Group, told CNNMoney.com.
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