According to an article on CNBC titled – "Billionaires are hoarding piles of cash" – the average cash balance of the world's billionaires is US$600 million. Wouldn't that be nice!
According to a report by Wealth-X and UBS this marks a US$60 million increase on the prior year and equates to approximately 20% of the average billionaire's net wealth.
The high cash balances suggest some of the wealthiest and most successful business people in the world don't believe now is the time to invest their mountains of cash.
With the ASX looking set for a wipeout in 2014, despite being up around 6% as recently as early September, now could be the time for all investors to think about keeping some powder dry. Indeed, at this point the return from dividends may just beat the returns from cash for the calendar year, but not by much and certainly less so on a risk adjusted basis.
What should you do?
The strategy of holding cash doesn't mean you personally need to allocate a portion of your portfolio to cash. If your aim from holding cash is to provide you with the flexibility to pounce on opportunities as they arise over the next few years then there are other ways to create cash exposure.
One of those ways is to buy stocks with strong balance sheets, available debt facilities and cash of their own. This way you can remain fully invested but still be exposed to the leverage which cash provides.
Two cashed-up stocks
Two stock opportunities currently available which could suit some investors are Premier Investments Limited (ASX: PMV) and Wesfarmers Ltd (ASX: WES).
Clothing and stationary retailer Premier recently announced it had $313 million of cash on hand and an investment in listed appliance maker Breville Group Ltd (ASX: BRG) with a market value of $265 million. This provides the group with significant fire power.
Meanwhile conglomerate Wesfarmers has sold a number of assets recently which has massively strengthened the group's balance sheet and positioned the group with the flexibility to make significant acquisitions in the future.
