Dave Kauppi is Managing Partner with MidMarket Capital Advisors, LLC. MMCA is an investment banking, business brokerage company, providing commercial financing and intermediary services to business owners in it, healthcare, and a number of industries. The company counsels clients in M&A, exit planning, valuations, “Smart Equity Capital Raises”, business acquisitions, and sales.
Dave graduated in the Wharton School of Business, University of Pennsylvania with a BS in Economics / Finance. An MBA was received by him from DePaul College or university. Dave is the Editor The Exit Strategist Newsletter, rated by New York Times SMALL COMPANY, “Best for deal conditions and strategy” Dave began his technology focused Merger and Acquisition practice after a twenty-year career within the info-technology industry. His varied history includes positions in hardware (Storage Technology Corporation), IT Services (IBM’s Service Bureau Corp.Dave has three grown children. He likes golf, badminton, training, fly fishing, investments, and, of course, a good party.
This is not the beginning of a lifetime career of market timer. Throughout the partnership years, he did go back and forth (in weighting) between general issue holdings and workouts leaning more towards workout routines when marketplaces were expensive. This is not a lot market timing just as much as moving resources to where they have the best potential returns.
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- 3 years back from Yorktown NY
He does liquidate the relationship in 1969, right at the very top. This is partially because the markets were too high obviously. But on the other hand, he was wanting to beat the market by a broad margin which got harder and harder to do. I have no idea if Buffett would have recommended to visitors to sell stocks just because they are costly if someone acquired a profile of shares they liked. He did hold onto his BRK shares and bought more, I believe, in the early 70’s and never sold a share.
He also said that he wanted to slow down, so the unwinding of the partnership was sort of a transition phase for him. In his last notice to his partners, he saw potential comes back in the stock market of 6%/year. He mentioned that bonds for the first time offered the same potential returns as stocks, though. And he does recommend a collateral manager (Ruane).
This expected to come back isn’t too different from what he stated before; in early stages he saw potential comes back of 5% in stocks and shares and kept operating his partnership for quite some time thereafter. Even in BRK (in 1970), he sold all marketable securities without further plans to buy any in the future. The sale was to fund the purchase of the bank or investment company. He bought a bunch of shares throughout the 1970’s giving an answer to the discount prices.
But this isn’t really market timing either, as he was just giving an answer to market prices that are cheap. Note that he was very alert to inflation and it’s side effects on stocks. And yet, he kept buying stocks. That is no action of a market timer. He even proceeded to go as far as to question the validity of the legal framework of a connection (sort of a Buffett version of “Bonds are Dead” proclamation, I guess). But he kept buying stocks and shares.
Later in the 1980’s, 90’s, and 00’s, he also responds to prices by not buying stocks for lengthy periods. He buys more private businesses and retains bonds and cash when nothing else is available. But it’s interesting to notice that cash levels are not held for very long (he always needs to hold some money) as capital is eventually deployed somewhere.
This is an important difference to make: Buffett will insist on bargain or reasonable prices and a margin of protection to buy a stock, but that is not required to keep a stock. For long-lasting holdings, he would not think of selling even if it got significantly overvalued. Most market timers will sell or get out when prices are no longer attractive or reasonable (and wait in cash.