Thicken My Wallet, drafted a great post this week called Cash is an Investment Category, where he writes of the internal struggle to not be fully invested. This post hit home for me as I have found that once my cash reserves hit a certain level, I start to seriously look for stocks on sale.
Patience is such a huge attribute that a successful investor needs. It is not always easy to allow cash to pile up in your portfolio when you're mind is constantly looking to the next stock that you would like to add to, or start a position in. After all, what am I doing; what have I set out to accomplish long term? I am investing for the long term, not stockpiling cash. That being said it is easy to see that throwing money at stocks whenever you have powder dry is not always the best strategy. There is something to be said for having patience, building cash positions, and attempting to use this cash to invest in beaten down stocks when there is 'blood in the streets'.
That being said, right now I am 3.1% cash so I am getting to the point where I can afford, fee-wise, to buy something. Coincidentally there was a fire sale this week on the markets, but I'm not sure the blood has hit the streets yet. I am not going to be hasty but here are the situations I am monitoring most closely currently:
1. Bank of Nova Scotia (BNS). I opened a position in BNS back in August of 2007. Currently my adjusted cost base on the stock is $48.39. Scotia closed Friday's trading at $48 even.
Yield = 3.9%
Price/Earnings = 11.9
Price / Book = 3.1
Last time stock traded at this level = August 16, 2007, the infamous date
2. Bank of America (BAC). I opened a position in BAC back in November of 2007. BAC announces earnings on January 22, 2008, which by all accounts should be horrendous. I really don't care though. What I do care about is their juicy dividend which they have raised nicely for a long while. Unknowns in investing can be a killer. I really wish I knew what the odds were for a dividend cut. If the odds are extremely low, then I would add to my position. Right now I am paying close attention to analyst, and BAC management comments to try to get a read on this, but I realize that there may not be any assurance.
Yield = 6.4%
Price / Earnings = 9.0
Price / Book = 1.4
Last time stock traded at the level = May of 2004!