Everybody Wants To Go To Heaven, But Nobody Wants To Die
You've read me post -- and doubtless have read other value investors say -- that stock bargains aren't plentiful.
So in that respect, falling markets are welcome. No one wishes for a full-fledged, multi-year bear market. But it's been a long time since we've seen a 20% correction. And if we see something even approaching that, you can bet bargains would appear.
The other side of the coin is that those stocks being held in our brokerage accounts would get bloodies up a bit. Or more than a bit if panic selling becomes epidemic.
What to do?
Right now I'm 20% in cash. I'll be adding more cash to my brokerage accounts in the weeks and months to come. My current holdings are mostly in positive territory, even after the past few days. I'm content to hold them even if they sell off with the market. Heck, the stocks underwater -- you know, Media General (MEG/NYSE) and Takefuji (8564/JP or TAKAF/OTC) -- were in that shape before last week's market drop. So in my mind their prospects remain intact.
My bet is that some things worth doing will bubble up in the coming days, weeks, months. Regular readers know I like to put 4%-5% in each new position. I'd love to divide my cash into four new buys. There are no guarantees I'll find them. But if I do, I'll gladly see my current holdings decline in price in the near term.
Check out AVCA for a valuable falling knife and WILC.
WILC is a top holding in my fund (10%), AVCA is a slightly less than 5% position but may buy more.
Posted by: Amit Chokshi | March 06, 2007 at 09:40 AM
Amit: Thanks for the tips. I'll check 'em out.
Posted by: John | March 06, 2007 at 12:24 PM
I can't recall that you've ever discussed asset allocation. Does "20% cash" mean that you hold 80% stocks and no other financial assets?
Posted by: Dennis Mangan | March 06, 2007 at 09:56 PM
Dennis: 20% cash refers only to my brokerage accounts. I have other financial assets not counted in my stock market portfolio.
Posted by: John | March 07, 2007 at 12:02 AM