I continue to remain ~25% cash and no I am not bearish. I don’t know why we must think someone holding cash must be bearish. To me it’s just another position. I have shifted some of the cash to my existing bets which had favorable valuation (Bluejet, Ceinsys and Axiscades. Have little in Holmarc too but nothing incremental since it’s too illiquid). I have also started nibbling at some financials (not my forte, this will just be a trade) which could benefit from further rate cuts, maybe up to 100 bps in 6 months could be coming in this benign environment of low inflation, low growth we are currently facing. Global headwinds remain and I think the 25% cash provides me enough of a hedge to sleep peacefully without worrying about the madman.
The way I think of investing isn’t very different from the way I play Poker. I have a thread on the parallels which might shed light on my thought process. In poker, after you have had an excellent run, it is important not to get carried away and make suboptimal bets. The high from the wins, combined with a table on tilt, leads to irrational decisions. People in the table who have lost money or haven’t made much (as most of the indices show since June 4th last yr or Jan 1st last yr) take risker and riskier bets which lures you into playing sub-optimally with them. This I would always like to avoid.
I had written end of Dec '23 that I would be happy with 20% returns for next year ('24) because of how abnormal the preceding 18 months returns were. The bets I made then I thought would take fairly longer period of time to play out but were cheap. I was worried of a difficult period in '24 so chose good value stocks with long-term growth. Stocks bought just before and after that period - like Wockhardt, Shaily, Ceinsys, Sharda Motors, Garware and even Genesys paid off handsomely. But the key to all these was the price paid - I had got all of them at juicy valuations. The returns during this period is in excess of 160% at pf level, despite current drawdown of ~10% from the ATH made just 4 weeks back (when BlueJet and Shaily were defying gravity).
So it is only natural that I try to preserve these abnormal returns and look carefully at what to bet on. I continue to be on the lookout for value with growth that could lead to momentum. This is the thing that has worked out very well for me. But it has also come after extensive work of turning at least 300-400 businesses to find the 5-10 that qualify and saying no to a lot of great businesses because they weren’t suitable bets for me. It will take time but there are some promising bets in financials which I think are worth a look. I don’t want to be lured into things I don’t understand too well, so will take the time to understand and build positions.
Just like poker, there are infinite hands. What’s the hurry?
P.S. I am doing what works for me. I realize most don’t bet this way (and might even feel insulted to use the word “bet”), so I would suggest caution in trying to adapt something that may not work for you. I am just writing what I am doing without any filters because that’s how I have improved myself and my process in this forum