????Value investor Steven Romick doesn't see a lot of room to move on Wall Street, but he still sees a few opportunities.

????By Katie Benner

????With the Dow crossing 10,000 for the first time in more than a year and earnings season generating some pleasant surprises, stock values are higher than they've been in a year. So can value investors still make money in this environment?

????The short answer is yes, says Steven Romick, portfolio manager of First Pacific Advisor's Crescent Fund (FPACX). But the task is much harder now that there are so few truly undervalued companies.

????Romick's $2.2 billion fund has beaten the S&P 500 in every 10-year period since its inception in 1993, according to Morningstar, and it is up 22% this year. He looks for value in stocks of any size, bonds, and convertibles.

????He spoke with Fortune about why he's nervous about the economy and where he's still putting his money to work.

????What makes you so nervous about this market rally?

????Simplistically, it's because the market went too low, predicated on the belief that we were on the precipice of a depression. I would argue that we were on the precipice and that the government successfully avoided that economic debacle.

????However, there are now questions about the medicine that the government prescribed to achieve that short-term success. You have a lot of ad hoc plans being made by people with their own agendas. Things rarely are accomplished well under those circumstances.

????We're not sure what the impact will be so we're staying on the sidelines somewhat until we have clear understanding of range of potential outcomes and the unintended consequences.

????The big question is what happens when the stimulus disappears? What happens to the stock market when people realize that corporate earnings won't be as robust as we've come to expect?

????Have you already seen unintended consequences from government efforts to stimulate the economy?

????There are small examples here and there. Like the Cash for Clunkers program. There were almost 700,000 participants and the average rebate was $4,200. If you think about the cost of a car, the government just encouraged hundreds of thousands of people to take on more debt at a time when consumers should be improving their balance sheets.

????My controversial point of view is that we need to experience pain for the benefit of the longer term health of the economy. What we are experiencing today is the result of years of living beyond our means.

????Americans need to live within their means again. It will give the consumer less horsepower and will surely disappoint many corporations, but we have to do that to truly be strong in the future.

????What does a smart investor do when things are this uncertain?

????Be very careful. There is lots of information and noise flying around, and you need to put that aside. When there is a lot of volatility, or strong market moves, people can get frightened into buying or selling. Right now people are being frightened into buying, because they're afraid they'll miss the rally higher.

????Put that noise aside. For me, I only care about the price two times, the day I buy and the day I sell. I buy when companies or industry groups or asset classes fall from favor. But right now most things are in favor, so it's not the ideal environment for a Steven Romick.

????Does this mean there's nothing left for a value investor like you to buy?

????There's not a lot of room to do smart things, so we are largely on the sidelines. We put a lot of capital to work in the winter when prices were truly low and have been taking profits selectively.

????But we do still see opportunities in energy services, health care, and in the distressed and fixed income credit space.

????Can you give us an oil services name you like?

????One company would be Ensco International (ESV). It's one of the larger offshore jackup rig companies and it has a deep water presence. We like oil-related stocks generally because oil protects against inflation and weakness in the U.S. dollar. And the supply-demand profile is good, for oil service companies.

????Supplies are decreasing as demand is increasing, which means that oil companies will have to generate new finds or pull more oil from existing fields. They will need more rigs and that bodes well for a stock like Ensco. The company has good managers who are reasonable allocators of capital. We own other companies in the space, but this is one of our bigger positions.

????And who do you like in health care?

????Right now we are looking at names in the managed health space, and one that we like is WellPoint (WLP, Fortune 500). There is of course the risk that the government will take away business from those companies and just do it all themselves. But we don't think that is a likely outcome. The stocks have been discounted tremendously on that risk.