Bill Nygren Commentary: "As shown by Bear Stearns, the market today is extracting a large toll from forced sellers. Though we always discourage short-term investing, we believe that such advice is especially important now."
The gaps between price and value in a fearful market can become very large. If you have to sell stocks by a certain date, the risk is high that you might not get full intrinsic value for those shares. As always, we believe that equity investors, including those in mutual funds, should only invest capital that can remain invested for at least five years. We also don’t ever want an Oakmark fund to be a forced seller. That’s why we keep a percentage of each of our mutual fund’s assets in cash equivalents. Some argue that funds should invest every last dollar to prevent cash from being a drag, but we believe that by holding some cash we not only avoid the cost of forced selling, but we are positioned to benefit when other sellers become desperate.
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The gaps between price and value in a fearful market can become very large. If you have to sell stocks by a certain date, the risk is high that you might not get full intrinsic value for those shares. As always, we believe that equity investors, including those in mutual funds, should only invest capital that can remain invested for at least five years. We also don’t ever want an Oakmark fund to be a forced seller. That’s why we keep a percentage of each of our mutual fund’s assets in cash equivalents. Some argue that funds should invest every last dollar to prevent cash from being a drag, but we believe that by holding some cash we not only avoid the cost of forced selling, but we are positioned to benefit when other sellers become desperate.
Read the complete commentary
