Top value investor Chuck Akre says he’s remaining cautious on the stock market, though he’s finding a number of picks that he says are low-risk, high-reward options.
“The US is in a slow recovery,” Akre recently told Louis Rukeyser’s Wall Street (a tip of the cap to Nasdaq.com’s Jim Fink for highlighting the interview). “I’m an optimist, a quality that’s essential to being a successful investor. That being said, it’s best to remain cautious. That means holding ample cash so that you can take advantage of the opportunities created when the market takes the occasional spill. After all, the market is up nearly 100 percent from its March 2009 lows.”
Akre says high debt and high unemployment will continue to constrain consumer spending, and prevent the U.S. from growing out of its debt. The country will likely have to inflate its way out of debt, he says, adding that he thinks there’s a good chance of significant — though not “massive” — inflation.
Akre also discusses some of his holdings, many of which are companies that aren’t linked to consumer spending, or which tend to benefit when times are tough. “Don’t be overwhelmed by a rising market and don’t be driven by the fear of missing out,” he says when asked what his best piece of advice is. “Make sure you have a margin of safety in your pool of assets. Also make sure that you’re prepared for a rainy day should it come — not that I’m predicting one.”