With the release of Berkshire Hathaway's quarterly results the news wires have been filled with the fact that the company has accumulated over $50 billion in cash, presumably at least partially because Warren Buffett has failed to find any businesses which meet his buy criteria.
No doubt the world's most famous investor would describe this as – a happy problem, but a problem nonetheless.
As a value investor, Buffett is only interested in buying businesses at appealing prices. As he puts it, he likes to wait for a 'fat pitch'. In other words, he wants to be close to certain that the investment will turn out well – he doesn't want to risk striking out.
While it can be risky to draw comparisons with Berkshire Hathaway and Warren Buffett, there is one Australian company and investor who stands out for understanding the value of holding cash and of waiting for the right opportunity to present. Premier Investments Limited (ASX: PMV) is run by billionaire Solomon Lew, who also has an enviable investment track record and is sitting on a pile of $241 million in net cash. Pleasingly for shareholders in Premier Investments, Lew appears to be a waiting for his own fat pitch and not risking shareholders' funds in a sub-par investment.
However, opportunities are still available for the individual investor.
Buffett and Lew have a unique problem which most individual investors don't face – they must put a very large amount of money to work.
While in theory, occasionally the whole market could be so expensive that there is not even a single undervalued stock for the individual investor, this scenario would be very rare indeed. In fact, with enough searching there is nearly always value available in some corner of the market which the canny individual investor can profit from.
