One my favorite quotes as it relates to investing is "If there is nothing to do, then do nothing."
Investing is not about what assets someone buys and sells, but more about a mindset predicated on rational capital allocation. If capital cannot be allocated intelligently, then then capital allocation decision is, in fact, not to allocate capital. That is an investment decision that many often forget. By not investing, one is indeed making an investment decision.
When Warren Buffett shut down the Buffett Partnerships in 1965, he basically went through a period of nearly seven years without making any serious investments for Berkshire. Then, after the 1972 bear market was in full force, Buffett began buying.
But the wonderful thing about investing is that your role as investor does not stop when you are not buying or selling securities. On the contrary, an investor can never stop learning or searching. Today's overpriced business can be tomorrow's multi-bagger opportunity. Never stop searching and learning.
Mega-cap IBM (IBM) should be very intriguing to any ultra-conservative investor given that shares now trade for $157 and that Buffett paid around the same average cost when he put $10 billion into IBM, making it one of Berkshire's largest equity positions. Now is a great time to understand and learn more about IBM.
One of my favorite activist firms, Value Act Capital, recently got a seat on the board of flooring giant Armstrong World Industries (AWI). Value Act owns 17% of Armstrong and its presence here is a very interesting sign. At $50 per share, you are paying the same, if not less, than what Value Act paid to acquire its block.
For the more adventurous investors, energy company EXCO Resources (XCO) now trades below $2 a share. The market is signaling that this leveraged energy play is either going to have to shutter operations or raise additional equity and dilute shareholders, two of which are the best in the business: Howard Marks and Wilbur Ross. Betting on EXCO is a rather black and white exercise. If the business makes it, the equity is probably worth 3x-5x the current price, not accounting for any possible dilution.
