Since about November, I have received a significant amount of e-mail correspondence from readers asking how to approach oil stock investment against the overall desire to maintain adequate cash reserves that act as “dry powder” for attractive opportunities. I haven’t responded to any of those e-mails, but I want to address the question in its broadest form right now: How should the zeal of picking up attractively priced assets be balanced against the desire to maintain proper cash balances for the next opportunity?
First, I think people should avoid fear-of-missing-out syndrome. Benjamin Graham wrote in The Intelligent Investor that “there is always something intelligent to do.” Sure, some environments are easier for finding stocks that will produce outsized future wealth than others, but even the most bubbly of stock markets contain opportunities that deliver attractive returns.
Take the summer of 1999, for example. The P/E ratios of most stocks at … Read the rest of this article!