I sound like a broken record when I say for the umpteenth time “the market is going to roll over.” We wrote in recent weeks the importance of being an active manager. Only active managers can navigate the choppy seas of this turbulent economy. Further, we always favor quality management teams and quality names. However, now is the time to increase the quality factor while simultaneously increasing portfolio concentration. Eliminate holdings where you lack trust in the senior team (they should not be holdings to begin with). Overweight those leadership teams with a track record of consistent success over time.
- A 20-30% cash position is not unreasonable for those whom are able to hold significant cash positions.
- A 20% hedge against long positions sounds about right.
- Reducing exposure to include only those names you consider A+’s is probably wise. For example, Microsoft (tkr: MSFT) is an A+.
- Q2 reports will almost certainly be awful and further uncertainty is likely to ensue. It’s preferable to identify the tsunami before it hits the shore.