FORTUNE–David Herro liked Japanese stocks way back in 2011, when some economists and fund managers were convinced that the country was heading for a financial blowup. He thought many of Japan’s companies were producing excellent returns on equity while trading at low valuations. Such stocks comprised many of the top holdings in his $13.6 billion Oakmark International Fund (OAKIX). It seems that Herro, 52, was ahead of the curve. The election of Japan’s Prime Minister Shinzo Abe in 2012 sparked a massive rally in the Japanese equities market, with the Nikkei 225 rising more than 80% from November 2012 through this spring.

David Herro

Japan’s stock market recently began to falter, and some analysts said it was because investors doubted whether Abenomics, short hand for the economic policies Abe has pushed to revive Japan’s moribund economy, would really work. Herro says he’s unwilling to write off the turnaround so quickly. “We’re on track to see that a real reform story is happening in Japan,” he says. “This is a multi-year investment.” Below Herro tells Fortune what it will take for Japan to be a successful turnaround story, and what stocks he likes now.

Fortune: Why do you think Japan’s stock market has fallen more than 20% since May 23rd?

Herro: The selloff is completely understandable given that the market jumped from 700 to almost 1300 in 6 months. You’re bound to see some profit-taking when you have moves up nearly 100%. There are certain things you can do to take advantage of that situation and make sure you’re positioned right.

For example, we tend to be very buy-and-hold, but we were overweight [Japanese stocks] a year or so ago. At one point they made up about 25% of the portfolio. Now that is more like 14% because we trimmed our position when the market nearly doubled and the upside shrank.

Full article on David Herro via finance.fortune.cnn