Markets and Investing Strategy: Insights from a Leading Fund Manager

Markets and Investing: A Unique Strategy

Jeff Muhlenkamp knows that in some markets, the best way to grow his clients' money is to do nothing with it.

The manager running the namesake Muhlenkamp Fund (MUHLX) has topped 98% of the funds in the large-cap value category in the last five years, according to Morningstar. He has beaten his benchmark in each of the last four years, and a strong finish to 2024 could extend the streak to five.

Cashing In on Patience

What's fascinating is that Muhlenkamp has outperformed while clinging tightly to cash, even though conventional wisdom says doing so can weigh on returns. In mid-2022, Muhlenkamp said he had a staggering 45% of his portfolio in cash, which he cut to 30% in early 2023. That unorthodox strategy paid off, as the Muhlenkamp Fund scored a positive return in 2022, which was the worst year for US stocks since 2008.

Allocating Cash Wisely

Although Muhlenkamp has since put cash to work, he still has about 14% of his fund's assets on the sidelines. Much of that stockpile was built when he trimmed positions that hit his fair-value levels. The leading fund manager is in good company, as Warren Buffett's Berkshire Hathaway held a record level of cash, which was about 17.5% of its assets, midway through the year.

Critical Insights into Markets and Investing

In a recent interview with Business Insider, Muhlenkamp said he's willing to deploy his cash pile. However, he added that the hurdle to invest is unusually high since stock valuations are pricey, the economy seems to be weakening, and cash is yielding around 5%. This strategy underscores the significance of patience and the careful allocation of funds for long-term success.