When to invest?

We do not try to time the market and we think investors shouldn’t attempt this either.  Furthermore, we do not take a stance on whether or not the stock market is overvalued or undervalued.  Instead, we take a stance on whether or not each of our companies is overvalued or undervalued.  There have been a few periods of high valuation where we were not fully invested simply because the price of some of our companies rose to such a level that we were no longer interested in owning very much.  In particular, during the buoyant markets of 1999 and early 2000 we had net cash of over 30%.  But this was an anomaly:  it is an unusual situation where we cannot find a quality company to own that offers a superior risk return proposition relative to investing in treasury bills.  To be sure, if we could time the market and knew for certain that stock prices were going to fall, then we would simply sell everything, wait for the decline and then reinvest all of our money.  We do not believe, however, that it is possible to forecast the direction of the stock market in the short term.  Therefore, as long as we can find companies that are generating strong cash flows, have excellent growth prospects and are trading well below intrinsic value, we are likely to be a fully invested fund.  We believe that the best way to earn superior investment returns over the long run is to stay invested.