Jump to content

How much of your portfolio is in cash?


ourkid8
 Share

Recommended Posts

Very little cash. I should probably have more, but I keep seeing things that I like, that are cheap-to-fairly-priced, and that are very well protected on the downside, so I can't resist.

 

This could be one of my main weaknesses as an investor. I have a hard time resisting when I see one of the handful of companies that I like sell cheaply, and I hate making macro predictions, because there are too many variables and it's almost always possible to make plausible-sounding scenarios for the market going up, down, or sideways...

 

What makes me sleep well at night is that I don't invest in cigar butts, so if things go down, chances are I'll see a big paper loss and miss an opportunity to invest at low prices, but I shouldn't see permanent capital losses because I only buy companies with little or no debt and usually substantial cash, a strong balance sheet and earning power, and a proven track record of allocating capital well during downturns. So while I might not have lots of dry powder, the companies I own usually do, so during tough times they could do buybacks, acquisitions, gain marketshare when the competition stumbles, etc.

 

That being said, I've been planning to raise more cash for about 6 months, but I always end up buying something with it before it has a chance to pile up very high...  :-\

 

Anybody else has a similar experience, or is it just me?

Link to comment
Share on other sites

What makes me sleep well at night is that I don't invest in cigar butts, so if things go down, chances are I'll see a big paper loss and miss an opportunity to invest at low prices, but I shouldn't see permanent capital losses because I only buy companies with little or no debt and usually substantial cash, a strong balance sheet and earning power, and a proven track record of allocating capital well during downturns. So while I might not have lots of dry powder, the companies I own usually do, so during tough times they could do buybacks, acquisitions, gain marketshare when the competition stumbles, etc.

 

This is how I went through 2008.  By mid-year I was 30% +/- cash and bonds with BRK and FFH as large positions.  Turns out, in bad market conditions, even solid companies with wonderful balance sheets can still get killed.  For the year I was down around 25% (vs. 37% for the S&P) and found myself selling cheap stocks to buy even cheaper stocks. 

 

I have less cash now (~15%), but I view all of my holdings as cheap, well positioned, and with solid balance sheets.  Even though we've barely pulled back from the highs of the year, I find myself wanting to buy more of what I own even though I see the market set up for a serious correction.  I'm just waiting for now, quietly hoping for a more significant pull back in the 2nd half of the year, but not wanting to sell anything I own.

Link to comment
Share on other sites

Guest misterstockwell

 

This is how I went through 2008.  By mid-year I was 30% +/- cash and bonds with BRK and FFH as large positions.  Turns out, in bad market conditions, even solid companies with wonderful balance sheets can still get killed.  For the year I was down around 25% (vs. 37% for the S&P) and found myself selling cheap stocks to buy even cheaper stocks. 

 

 

That's the problem. One can tout how they are buying value stocks, and how it is a buying opportunity when they decline, but it still sucks. They get killed just like everything else, and you can keep buying and they can keep getting killed. Yes, it should all work out, but I don't want to have that feeling again. I went into 2008's decline with a large amount of cash, and didn't buy until one of the whoosh down days in November, but December to March was not fun even though I kept buying.  The macro situation is just as frightening to me now, perhaps even worse. I won't lose much sitting on the sidelines and seeing how things develop.

Link to comment
Share on other sites

While it's great to make money, investors have to be able to sleep well at night.  Everyone should invest based on their temperament, not on what books suggest.  So if you feel comfortable keeping cash, keep cash.  If you are able to tolerate wide swings, stay invested.  Cheers!

Link to comment
Share on other sites

While it's great to make money, investors have to be able to sleep well at night.  Everyone should invest based on their temperament, not on what books suggest.  So if you feel comfortable keeping cash, keep cash.  If you are able to tolerate wide swings, stay invested.  Cheers!

 

As a corollary, your tolerance to swings is likely less than you think it is - particularly if it's determined during good times.

 

Link to comment
Share on other sites

As a corollary, your tolerance to swings is likely less than you think it is - particularly if it's determined during good times.

 

I would agree with that Norm.  I think in times of crisis, unfortunately even value investor's emotional make-up tends to track similarly to the general population. 

 

Back in late 2008/early 2009, I would say less than 10% of value investors could tolerate that volatility without some emotional or mental stress...probably much less than 10%.  And if you weren't somewhat prepared, you probably suffered quite a bit emotionally.  Cheers! 

Link to comment
Share on other sites

>60% cash, excluding short term merger arb, not talented enough to copy fairfax's long deep value/short market but intelligent enough (time will tell) to be in the company of watsa, klarman, rodriguez to realize that current risk/reward is unfavorable.....

 

regards,

rijk

Link to comment
Share on other sites

Almost no cash. Was up to 15% but then BRK gobbled up those funds. On top of BRK being a good value play, I badly needed some geographical diversification so I'm not sweating. OMXPSI -9% this year so maybe I can start finding more domestic values soon, as well.

 

Happy midsummer's eve!

Link to comment
Share on other sites

For everyone with high cash balances in your portfolio, what are you waiting for?

 

- Likelihood of a more serious correction is high imo. The decline of the last weeks wasn't that impressive. People tend to forget that the market can overreact in both ways. I started buying again though.

- Low confidence in my own stock picking skills because of my limited experience, especially in the current market. I don't believe I could sit out a serious correction if I would be fully invested.

 

That said I don't believe I will ever be 100% invested for long, 90% tops. I am extremely risk averse and like the 'patience game', it's in my nature. I just like the mental cushion the cash provides and I am willing to sacrifice return for it.

Link to comment
Share on other sites

 

This is how I went through 2008.  By mid-year I was 30% +/- cash and bonds with BRK and FFH as large positions.  Turns out, in bad market conditions, even solid companies with wonderful balance sheets can still get killed.  For the year I was down around 25% (vs. 37% for the S&P) and found myself selling cheap stocks to buy even cheaper stocks. 

 

 

That's the problem. One can tout how they are buying value stocks, and how it is a buying opportunity when they decline, but it still sucks. They get killed just like everything else, and you can keep buying and they can keep getting killed. Yes, it should all work out, but I don't want to have that feeling again. I went into 2008's decline with a large amount of cash, and didn't buy until one of the whoosh down days in November, but December to March was not fun even though I kept buying.  The macro situation is just as frightening to me now, perhaps even worse. I won't lose much sitting on the sidelines and seeing how things develop.

 

That's basically my story as well.  Went into the crash with 30+% cash and bonds, but had moved most of it into stocks by November.  November through March was very painful.  Despite my value mindset and all the Buffett soundbites about being greedy when others are fearful, my emotional reaction to the first quarter of 2009 had me questioning everything I thought I knew.

 

I don't feel the same way today as I did by the end of 2007, and I think the stocks I own are better and cheaper than some of what I owned at that time.  So, I'm torn about my cash position.  I like what I own, but I expect that the next 6-12 months will offer better opportunities. 

Link to comment
Share on other sites

Other than making a negative macro call, what is making so many of you guys so negative here? Please give me an example of a well known, well established company out there that is trading at nose bleed valuations?

 

We have all heard about the CRM, LULU and of a couple crazy IPO's but, other than that, I see fear everywhere, not greed. It is not hard to find many really cheap stocks today.

 

Cardboard

Link to comment
Share on other sites

Other than making a negative macro call, what is making so many of you guys so negative here? Please give me an example of a well known, well established company out there that is trading at nose bleed valuations?

 

We have all heard about the CRM, LULU and of a couple crazy IPO's but, other than that, I see fear everywhere, not greed. It is not hard to find many really cheap stocks today.

 

Cardboard

 

Well, it starts with the macro picture right? Doesnt really matter if good companies are fair value if your macro outlook is not good.

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...