Billionaire investing legend Warren Buffett is fond of counselling investors to 'wait for the fat pitch'. In fact, many of the catchy phrases that Buffett uses to get his message across such as…
- Invest within your circle of competence
- There are no strike outs
- Demand a margin of safety
- Rule number one: don't lose money. Rule number two: don't forget rule number one
…are all just different ways of telling investors to wait for that juicy pitch when the odds are firmly in your favour!
This advice from Buffett is perhaps most evident in the cash hoard that Berkshire Hathaway has accumulated. Despite his investment prowess, even Buffett has trouble finding great investments all the time which results in Buffett letting the cash pile up as he waits for appealing investment opportunities.
A similar state of affairs would appear evident for some locally listed fund managers.
Magellan Financial Group Ltd's (ASX: MFG) flagship fund is holding around 15% in cash. Meanwhile, Platinum Asset Management Limited's (ASX: PTM) flagship fund has close to 18% net cash.
Some listed investment companies (LIC) also have significant cash positions. WAM Capital Limited (ASX: WAM) for instance has a massive 40% weighting to cash.
High cash weightings within a portfolio aren't exclusive to fund managers either, with a number of companies choosing to hold cash as they await a better time to deploy it.
One company which has been very patient is retailer Premier Investments Limited (ASX: PMV) which is controlled by investor Solomon Lew. Premier had a cash balance which was approaching $290 million when it reported its interim results earlier in the year.
The fact that numerous highly regarded investors are treading carefully and keeping some firepower in their pocket should act as a reminder that it is not always necessary to be fully invested.
With reporting season about to kick off in earnest next week, there will be many stock ideas floated and investment opportunities will no doubt present themselves. At the same time, it's ok to sit tight on your cash and wait for that fat pitch to appear.
