With stocks rising and fund inflows hitting 2004 highs, there is little doubt that high tide is rolling in for the bulls.

But the water still looks chilly to some value fund managers. A number of longtime market outperformers find themselves this holiday season with big cash positions -- and few plans to put that money to work at prevailing prices.

The

(FPPTX) - Get Report

FPA Capital fund, for instance, now holds a whopping 36% of its portfolio in cash -- a figure that could very well head higher next year, according to fund manager Bob Rodriguez.

"We have no urge to spend it right now," says Rodriguez. "We are looking for opportunities, but we are just not finding many at these valuations."

If value plays aren't abundant right now, optimism among financial advisers is.

Investors Intelligence

most recently reported bullish sentiment running at a yearly high of 57.1%, vs. 23.5% for the bears.

Fighting the tape is fraught with peril for cash-heavy funds in a rising market. Managers who seek shelter in cash must contend with investor anxieties about missing out on a big rally, as well as complaints about expenses that burden fund shareholders even as an increasing share of the portfolio gets stashed under a mattress.

Take Don Yacktman, whose value-oriented

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Yacktman fund currently holds more than a fifth of its portfolio in cash. The manager says valuations aren't attractive right now, but he rejects the notion that he's on the sidelines, saying he continues to look for places to put money to work.

"We try to make money for our clients, not lose less," says Yacktman, who weathered a similar storm in 1999. Back then, his decision to sit out the

Nasdaq's

wild run caused the fund to lose 16.9% in a year in which the

S&P 500

returned 20%.

Yacktman's caution later paid off. The fund rebounded in 2001 and 2002, thoroughly trouncing the indices during the market's collapse. Still, he says that doesn't make it easier for him to stomach his subpar year-to-date return of just under 4%, which is half that of the S&P.

Breakout?
S&P 500's fall rally

Yacktman says he is still finding values in the broken-down stocks he favors, recently adding shares of

Cardinal Health

(CAH) - Get Report

to his portfolio. He has also been increasing his position in

Coke

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, calling it "a money machine that just needs a little oil."

If he chooses, Yacktman can take solace in the fact that he is not the only well-known value fund manager feeling the heat. Other equity funds with 20% or more cash stakes include perennial outperformers such as the

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Longleaf Partners fund and the

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Clipper fund, as well as FPA Capital.

Two cash-heavy portfolio managers closely monitoring the sentiment indices with an eye toward a reversal in early 2005 are Dewayne Wiggins of the $13 million

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Lindbergh Signature fund and Donald Baxter of the $3 million

( EGRWX)Eagle Growth fund.

Baxter expects the market to remain overbought through year-end as institutional investors try to make up for lost time by snapping up stocks even at extreme valuations. He says that action speaks to a "herd mentality" and he intends to sit out at least until next year. Baxter says he hasn't heard much grumbling from his shareholders for not putting a big chunk of their money to work, despite his rather formidable expense ratio of 3.4% and a steep front-end load of 8.5%.

Perhaps his investors are remaining patient because his mid-cap fund has outperformed the S&P 500 by 10.5 points annually over the past five years. This year, Baxter trails the index by slightly over 3 percentage points.

To be sure, Baxter hasn't totally plopped down on the sidelines. He says health care stocks have grown relatively more appetizing as of late, so much so that he recently picked up shares of

LifePoint Hospitals

(LPNT)

for the fund.

For his part, Wiggins says he is comfortable sitting on close to 30% cash through the end of the year, especially now that "there are way too many bulls on the Street." He even hinted that he could go to all cash if he felt the circumstances called for it. His highest cash holding was 70% during the spring of 2002 at the trough of the bear market. That year, Wiggins' fund lost 8.8% -- but the S&P 500 dropped 22.1%.

According to Wiggins, the S&P 500 is overvalued by 40% at current levels. That means he will be forced to wait for a correction from its current perch near 1180 to the 700 range before he truly feels comfortable shopping for stocks. Wiggins expects to see that bear start growling in 2005, when he expects the economy's deteriorating fundamentals to cause inflation to spiral and subsequently level the overleveraged consumer.

"In the late 1990s, the wealth effect from the stock market drove consumer spending. In 2000 to 2004, tax cuts and lower interest rates drove consumer spending," says Wiggins. "There is absolutely nothing to drive spending next year."

In the meantime, Wiggins says the best opportunities are in gold mining stocks or in the recently introduced

StreetTracks Gold

(GLD) - Get Report

exchange-traded fund. The plays allow investors to take advantage of the declining dollar and rising inflation.

Jerry Dodson, fund manager for the socially conscious and highly concentrated

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Parnassus fund, found himself stuck with extra cash this fall because technology shares didn't sell off this summer -- breaking a habit ingrained over the past 15 years.

"The typical pattern did not reassert itself this year," says Dodson. "Right now it looks like we made the wrong call on tech's move, and we don't intend to chase it."

So how far would tech stocks have to fall before Dodson dives in? Dodson uses tech giants

Intel

(INTC) - Get Report

and

Cisco

(CSCO) - Get Report

as a barometer, saying the prices on these bellwethers would need to decline by at least 15% before he started dipping his toe into tech. Intel recently traded at $23, Cisco around $19.

While waiting for a selloff that might enable him to fill the rest of his tech portion of his portfolio, one that traditionally accounts for nearly 25% of his holdings, Dodson says he has had a great deal of success with his position in accounting software company

Intuit

(INTU) - Get Report

. He has recently increased his stake in the company, making it his fund's largest holding at 6%. "Intuit moves on the tax cycle, not the tech cycle," says Dodson.

And like many other fund managers sitting on piles of cash, Dodson sees nothing wrong with wishing for a market downturn that would permit them to put that closely guarded cash to work.

Says Yacktman, "From time to time the tree gets shaken. That's just the way it is."