Billionaire Buffett eating Ice cream at Dairy Queen
Billionaire Buffett eating Ice cream at Dairy Queen

The Wilshire 5000, an index of all U.S. publicly traded companies, is selling for right around 30 times earnings and paying a cash dividend yield of less than 2%. It’s no small wonder I’m not finding any cheap stocks. More and more, the best investors I know are either selling stocks and raising cash as their holdings approach or even exceed fair value… or they’re selling stocks and increasing the size of their short positions.

On Friday I spoke with a very wealthy and experienced investor who says he’s selling some “lower conviction” stocks and raising cash. He reminded me of an old Warren Buffett idea for deciding if it’s time to sell: Look at each stock you own and ask yourself if you’d rather see it rise in price so you can sell… or fall in price so you can buy more. If you’d rather see it rise in price, you should consider trimming the position or selling it out entirely. Ideally, you want to find yourself holding an entire portfolio of positions about which you have a high sense of conviction. Those are the ones you wish would get cheaper, so you can buy more of them. (Publisher’s Note: Billionaire Buffett likes ice cream from Dairy Queen. Maybe we can interest him to have the one here on Sadler Road in Fernandina Beach re-open before the Georgia Florida Weekend).

Interesting data coming out of Morgan Stanley recently:

According to their “debt-equity” clock they say it’s time to prefer stocks over bonds. According to MS we are entering the recovery phase after having been in the repair phase of the cycle.

During the repair phase balance sheets are tirelessly repaired by corporations, debt is paid down, costs are cut, cash is boosted and ultimately credit expands. MS believes the repair phase is just ending and we are moving into the recovery phase.

Only time will tell folks, but it looks better.

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