If you where all cash - What would you add in 2026 with many stocks being over priced?

[Milu]

4 hours ago, Eng12345 said:

Ehhh - you're going to pay taxes on the investment either way if you want to access your money ever

Well if you want to realise the gain in order to spend the money then I’ve no issue with that. But much of the above thread is concerning selling in order to invest the proceeds into another position. In that case you didn’t yet need the money so didn’t need to pay taxes yet. So if you currently hold asset A which you bought for 100 and is now worth 200, if you and pay capital gains of 25% you now have capital of 175. If you then invest that 175 into asset B which you believe will do better, this asset need to compound at a much higher rate than the one you sold just in order to break even. And the larger the capital gains tax rate the higher the differential in growth your new position needs to outperform the old.

[Buckeye]

50% FFH

20% BRK
30% S&P

 

And I’d do it all at once, as most studies show that the sooner you’re invested the better. 

[73 Reds]

14 hours ago, Buckeye said:

50% FFH

20% BRK
30% S&P

 

And I’d do it all at once, as most studies show that the sooner you’re invested the better. 

Mostly the same as what I own today but certainly less Berkshire.

[SharperDingaan]

15 hours ago, Milu said:

If you then invest that 175 into asset B which you believe will do better, this asset need to compound at a much higher rate than the one you sold just in order to break even. And the larger the capital gains tax rate the higher the differential in growth your new position needs to outperform the old.

 

It is just part of the investment decision; do nothing, if you don't think asset B can do it. No different to keeping that paid off old car or refrigerator that still runs perfectly well, versus changing it out for newer tech that is both more reliable and costs less to own. After retirement, the older you get the less likely you are to do the change, as you are less likely to get the full benefit ... 'cause you might 'croak' early. 

 

SD

Edited January 11 by SharperDingaan

[SharperDingaan]

15 hours ago, SharperDingaan said:

It exists primarily to kill the practice of selling underwater positions just before year end to capture the tax loss, and a repurchase in early January to capture the rally.  To demonstrate that the intent truly was a sale, you cannot buy it back for at least one month plus a day. If you do the taxman will deem the sale to have never taken place.

 

One of the better uses is in reducing the value of a RRSP via a < 30 day series of RRSP/Taxable account trades. A well followed stock that suffers a material set-back (NVO, UBS, DB, etc) will often fall like a brick, experience a dead cat bounce, then drift down again .... to the enterprising lad, if it goes your way, an opportunity to double-dip on the same capital allocation  A Muddy Waters suddenly trashing FFH, via a targeted short attack .... becomes your friend 

 

Thereafter, for a CAD investor, it just becomes a modelling exercise and a risk assessment. Abuse the opportunity through overuse, and the capital gains/losses will be treated as earned income .. as your investing has now become a business.  One more punch card thing.

 

SD

[Whensthepaintdry?]

In one of Chou’s recent annual letters he breaks down the math behind holding and selling with different tax rates calculated. It was a nice reminder for me. 

Edited January 11 by Whensthepaintdry?

[villainx]

1 hour ago, Whensthepaintdry? said:

In one of Chou’s recent annual letters he breaks down the math behind holding and selling with different tax rates calculated. It was a nice reminder for me. 

 

Which letter?

[Whensthepaintdry?]

https://choufunds.com/pdf/2024 AR English.pdf
 

Starts on page 6. 

Edited January 11 by Whensthepaintdry?

[villainx]

Thank you!

 

[tnathan]

On 1/6/2026 at 9:36 AM, coffeecaninvestor said:

I was at ~40% of cash as of late last year and adding rapidly due to savings. I'd prefer to be in the 10% range. 

 

I've been buying and think are still at cheap prices PYPL, CPRT, CNSWF, BRO, ADBE, PAYX, BAH, SYY, CHD, CP, UNH, ELV, FND, ACN, STZ, AJG, ODFL. 

 

Kind of lucky that some quality compounders have gotten taken out to the wood shed lately. 

 

NTDOY, APO, DOCS, MOH, PGR are getting more attractive, but are just on my watchlist. 

 

XOM looks to me like it could make a move higher.. so I might spend some time looking at oil companies. It doesn't strike me as particularly cheap, but they haven't done much in the last 4-5 years so maybe it is time. 

Nice list -- although I've been relatively aggressively adding to PGR.  You can buy deep ITM PYPL 2028 LEAP options for nearly no extrinsic value right now I think it's a good deal.

[Marco Van Basten]

56 minutes ago, tnathan said:

Nice list -- although I've been relatively aggressively adding to PGR.  You can buy deep ITM PYPL 2028 LEAP options for nearly no extrinsic value right now I think it's a good deal.

Why do you like PGR here?  Thank you.  (My worry has been how high of a market share can they get to.)

[tnathan]

17 minutes ago, Marco Van Basten said:

Why do you like PGR here?  Thank you.  (My worry has been how high of a market share can they get to.)

They have ~16% market share in auto and much less in home (but growing via bundling). I'm not sure what the upper limit is, but given their data and underwriting advantages, I don't think its here. I think we do see some more competition in the next few years, but I think PGR has built enough of an operational advantage that it will be hard to catch them. 

 

They've gone from 11% to 16%+ since 2018 ... can they get to 20 or 25% over time? I don't see why not. Huge opportunity to get to 5%+ in homeowners. Valuation has come way in and I think you're getting a fair price for a company that compounded bvps ~18% since 2018. Let's say that slows to 12-15% growth over the next 5 years. I'm ok with that. You're buying a company that has "inevitable" characteristics. Can you find reasons why this company won't be materially better in 5 years? I can't. It will be better and better as it grows, and the culture / use of data will allow them to best utilize AI vs. competitors.

[RichardGibbons]

3 hours ago, tnathan said:

Can you find reasons why this company won't be materially better in 5 years?

 

Isn't the big one that, in 30 years, auto insurance prices are almost certain to be much lower as a result of cars becoming self driven. It's unclear when the inflection in auto insurance will actually strike, but it seems conceivable to me that it could be in the next 5 years (and even if it's not in the actual financials, insurance stock price might already be discounting it in five years.)

[UK]

12 minutes ago, RichardGibbons said:

 

Isn't the big one that, in 30 years, auto insurance prices are almost certain to be much lower as a result of cars becoming self driven. It's unclear when the inflection in auto insurance will actually strike, but it seems conceivable to me that it could be in the next 5 years (and even if it's not in the actual financials, insurance stock price might already be discounting it in five years.)

 

WB many times has said that Geico would be his no 1 business, but I also think this is becoming a valid question/risk for autoinsurers.

[coffeecaninvestor]

9 hours ago, tnathan said:

They have ~16% market share in auto and much less in home (but growing via bundling). I'm not sure what the upper limit is, but given their data and underwriting advantages, I don't think its here. I think we do see some more competition in the next few years, but I think PGR has built enough of an operational advantage that it will be hard to catch them. 

 

They've gone from 11% to 16%+ since 2018 ... can they get to 20 or 25% over time? I don't see why not. Huge opportunity to get to 5%+ in homeowners. Valuation has come way in and I think you're getting a fair price for a company that compounded bvps ~18% since 2018. Let's say that slows to 12-15% growth over the next 5 years. I'm ok with that. You're buying a company that has "inevitable" characteristics. Can you find reasons why this company won't be materially better in 5 years? I can't. It will be better and better as it grows, and the culture / use of data will allow them to best utilize AI vs. competitors.

I agree a lot with this I think companies with large data sets are likely AI winners which is why I think healthcare companies will benefit a lot from AI. I also think PGR is in a similar situation with their data.
 

I also think self driving  is going to take generations to become the standard rather than a feature. I think driving is engrained in people and it will take awhile for it to change. Personally I’d use it similar to how I use cruise control now on long trips never local driving. But I have a car now that I won’t sell for a decade unless they gave me a mind numbing trade in value to buy a FSD car. I also think new cars are too expensive for the average American so unless we let BYD sell in America it will be slow. I think it’s exciting tech but I am skeptical. 
 

I also think great companies with great mgmt adapt and don’t sit just letting things happen to them. I am sure PGR is thinking about these challenges. Similar to how I am sure ADBE is come up with ways to beat AI and Figma. It doesn’t mean they will be successful but until it shows up in the financials I’ll give them the benefit of the doubt. If you’re always buying with the picture is the clearest you will never get earnings and multiple expansion which gives you the big home runs. 

 

Edited January 12 by coffeecaninvestor

[This2ShallPass]

On 1/10/2026 at 5:20 AM, dealraker said:

As a young man growing up without parents I gravitated towards relationships with older men and for me for whatever reason these interactions resonated around finance.  One of the wisest and most successful stock market and small business guys I linked up with said this:  "Charlie, you'll make most of your mistakes in the good times."

 

And...I listened decently well to this.  Looking backwards and not necessarily using my life but more what I've seen or see I'd say that both buying and selling investments, whether it be stocks or entering/leaving a business, in the midst of a boom period can be the most destructive force as to building net worth.   Selling a good business that's maybe slightly over-valued is surely a mistake - but so is buying a not-so-good business that is seriously over-priced and subject to a re-valuation in a less than frothy market.

 

The tax man is a serious interruption of building net worth in a taxable account or entity.  I've watched a lot of people go to cash through the years.  I've never done that though.

 

The easiest win is buying stocks in a severe down market.  But you do need to be willing to see stockhis fall much further than when you bought to eventually come out ahead.

 

Rambling of course.  One last thing that I do find interesting about COBF these days, here goes:

 

We often, very often, have numerous investors posting up about how much cash they have and often it is a huge percent of their portfolio.  Two or three years ago we had changegunnacome debate heavily with Gregmal about his (change's) massive cash and bonds holdings.  Greg of course was 100% correct and change was making a pretty significant miscalculation as related to eventual market levels.

 

Today is probably the least level of what I call "cash posting" I've ever seen on investment forums I've followed.

 

Rambling.

Thanks for sharing your wisdom with us! This is an important message to remember.

 

"you'll make most of your mistakes in the good times."

[tnathan]

13 hours ago, RichardGibbons said:

 

Isn't the big one that, in 30 years, auto insurance prices are almost certain to be much lower as a result of cars becoming self driven. It's unclear when the inflection in auto insurance will actually strike, but it seems conceivable to me that it could be in the next 5 years (and even if it's not in the actual financials, insurance stock price might already be discounting it in five years.)

From just a mechanical perspective of the DCF, what happens in 20+ years is almost non-consequential to the value today even at a moderate discount rate like 7-8% for a company like PGR that is very profitable TODAY.  The stock currently prices in very moderate growth in cash flows that IMO don't reflect the reality of the advantages they have built already and which will grow.

 

Putting the math aside, I agree that self self driving will definitely be a thing. But do you really think it will be enough of a thing to drastically impact earnings over the next 10 years? I ascribe nearly 0 % probability.

[RichardGibbons]

1 hour ago, tnathan said:

But do you really think it will be enough of a thing to drastically impact earnings over the next 10 years? I ascribe nearly 0 % probability.

 

I have no idea--any comment would be a complete guess. However, I do believe in Bill Gates' idea, "We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten."

 

So, my guess using that heuristic is that in 10 years earnings will be impacted, and I believe that impact, drastic or not, will have a drastic impact on the stock price because I think investors are smart enough to recognize that once the market starts shrinking, it's going to be relentlessly shrinking for a while.

 

(Also, I don't know the business at all--no research whatsoever--but I was simply responding to the question, "Can you find reasons why this company won't be materially better in 5 years?", a question phrased as if there were very unlikely to be any reasons. It seems almost certain to me that in 30 years auto insurance rates will be much lower on a real basis, and it's conceivable to me that the change begins to happen in the next 5 years. But I'm extremely ignorant on this one and have no horse in the race, so a wise investor would give no weight to my opinion at all. So, I think that you're quite sensible to assign a probability of it happening--in this case, you have decided ~0%--and running the numbers from there.)

[Sweet]

On 1/10/2026 at 1:20 PM, dealraker said:

As a young man growing up without parents I gravitated towards relationships with older men and for me for whatever reason these interactions resonated around finance.  One of the wisest and most successful stock market and small business guys I linked up with said this:  "Charlie, you'll make most of your mistakes in the good times."

 

And...I listened decently well to this.  Looking backwards and not necessarily using my life but more what I've seen or see I'd say that both buying and selling investments, whether it be stocks or entering/leaving a business, in the midst of a boom period can be the most destructive force as to building net worth.   Selling a good business that's maybe slightly over-valued is surely a mistake - but so is buying a not-so-good business that is seriously over-priced and subject to a re-valuation in a less than frothy market.

 

The tax man is a serious interruption of building net worth in a taxable account or entity.  I've watched a lot of people go to cash through the years.  I've never done that though.

 

The easiest win is buying stocks in a severe down market.  But you do need to be willing to see stockhis fall much further than when you bought to eventually come out ahead.

 

Rambling of course.  One last thing that I do find interesting about COBF these days, here goes:

 

We often, very often, have numerous investors posting up about how much cash they have and often it is a huge percent of their portfolio.  Two or three years ago we had changegunnacome debate heavily with Gregmal about his (change's) massive cash and bonds holdings.  Greg of course was 100% correct and change was making a pretty significant miscalculation as related to eventual market levels.

 

Today is probably the least level of what I call "cash posting" I've ever seen on investment forums I've followed.

 

Rambling.

Great post, valuable lessons

[bargainman]

On 1/11/2026 at 11:32 PM, RichardGibbons said:

 

Isn't the big one that, in 30 years, auto insurance prices are almost certain to be much lower as a result of cars becoming self driven. It's unclear when the inflection in auto insurance will actually strike, but it seems conceivable to me that it could be in the next 5 years (and even if it's not in the actual financials, insurance stock price might already be discounting it in five years.)

 

I wonder about this now.  Not self driving necessarily but repair cost.  2 data points.

- got 2 new cars.  CRV SUV 2024, toyota corrolla hybrid 2024.  CRV cost about 50% more than corolla.  Guess which has higher insurance and by how much?

- Acquaintance got lightly rear ended in Tesla by drunk teens.  The car turned itself completely off, and had to be 'reset' by the manufacturer.

 

 

Answers:

- corolla insurnace cost is no 50%, not 100%, but 3x the cost of the CRV.  My only guesses are that SUVs supposedly have lower insurance, and hybrid is very expensive to repair.

- Acquaintance told me the car cost about 50% of the car value to 'reset' even though it required no repair.

 

These self driving computers are not cars, but sophisticated computers/ electric systems on wheels.  Fixing them in the case of a crash seems very pricey.  So I wonder how that plays out in terms of insurance?

 

Any other thoughts or experiences?