With stocks at all time highs, many of us are wondering how much cash should we have on hand right now? I try to find out how much cash Warren Buffett and Mohnish Pabrai might have right now. Based on how Pabrai invests, maybe Alibaba could be a 3 to 5 Bagger!?
Buffett has been steadily increasing Berkshire Hathaway’s war chest of cash over the last several years, ballooning from around $40 billion in 2013 to over $140 billion in 2021. This amount of cash represents about 16% of Berkshire Hathaway’s total assets.
He doesn’t seem to mind staying in a lot of cash as the stock market has been roaring up.
Meanwhile, Mohnish Pabrai used to keep his cash in Berkshire stock, but when the market falls it takes down a lot of stock prices with it. So Mohnish recommends leaving cash as cash so we “have the complete freedom and optionality to put it to work when opportunities show up.”
Mohnish loves compounding at 26% per year so I explain how someone can double their money in only 3 years to get a 2 bagger! Those of us who are running a marathon of investing should get ourselves 26% oval stickers to put on our cars!
I explain Mohnish Pabrai’s cash allocation strategy in which he expects within 2-3 years that stocks will:
2x: 75% total portfolio
Based on this, his current stake in Alibaba could potentially be anywhere from a 3 to 5 Bagger. Who knows!
I try to figure out Mohnish’s current assets under management amounts and guess he could have anywhere between 10-30% in cash right now.
I talk about how much cash I’m currently sitting in because I think the markets are really overpriced and the stocks on my wish list aren’t really on sale right now (except maybe the one discussed above).
I’m waiting for my “fat pitch” (in Buffett baseball analogy terms) so I can buy my favorite, wonderful companies on sale someday.
I look forward to making more investor friends! Add me on Instagram: michellemarki.
If you’re interested in learning how to take control of your finances and start becoming an investor like Warren Buffett, check out my free PDF guide.