This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

We Doubled Our Cash Position For Stock Correction Ahead

This year has begun somewhat paradoxically for us at MCO Investments. Events at individual companies have kept us very busy, but the general “front-page” news flow has been muted compared to that of the last few years.

Even the Italian parliamentary elections and the Cyprus banking crisis--the two big events out of Europe this year--have so far failed to meaningfully move the markets as a whole.

This suits us perfectly, as we’d much prefer prices to be driven by fundamentals specific to the companies we own instead of the macro-driven “risk-on/risk-off” mentality that we believe has largely determined the path of global financial markets since the financial crisis.

In March, we doubled our cash position to 10% of the portfolio. Our decision was based in part on the valuation of the overall US stock market (it’s not cheap, although it’s not at bubble valuations either) and in part on a reconsideration of how we believe our core positions will perform in a market downturn.

We seek to have enough dry powder available in the form of cash in the event of a steep market decline when all stocks sell off indiscriminately regardless of their fundamentals. Given the high expected return hurdle that each company must meet before we invest, we believe our cash position should not be a meaningful drag on our performance.

On the contrary, we believe our ability to pick up assets on the cheap will be an important source of performance if a significant market decline occurs, regardless of exactly when that might be.

In the meantime, we are focused on supplementing our two core positions--Fairfax Financial (FFH)  and Berkshire Hathaway (BRK.B), which we believe will perform well in any kind of economic environment, with companies we believe are experiencing some sort of value-unlocking catalyst.

Whether the catalyst is increased dividends, large share buybacks, asset sales, emergence from bankruptcy, corporate restructurings, or debt reduction, what this disparate bunch shares in common is that the positive event is not expected by Mr. Market. We believe our returns from these investments should be very satisfactory once the catalysts become apparent even to Mr. Market.

The investments discussed are held in client accounts as of March 28, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.

Chris Olin

Chris Olin

Managed by a father and son team who are formally trained in finance, law, psychology and neuroscience. We have professional


Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,132.70 -81.72 -0.45%
S&P 500 2,104.50 -6.24 -0.30%
NASDAQ 4,963.5270 -24.3630 -0.49%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs