I am. Not coz of the potential of the economy or the optimism but the level of prices.

The shares (for many firms) are no longer cheap unless the economy can post high growth rates. PERs are have exploded. At the end of the day, 'value' counts.

There will be some bargains here & there but many are priced at high multiples including EABL, BAT & Safaricom & these 3 are among the top 10 capitalized firms. Even Equity is getting 'pricey' though it does surprise to the upside.

I do not understand the current price of ARM & ScanGroup but they do grow profits at a good clip.

Anyway, I think Buffettian & I worry the easy pickings are gone & what should I cash out of?

@AGuy

1) Check out http://www.berkshirehathaway.com/ and read WB's letters.
2) Read Charlie Munger's letters when he was at Wesco.

What do I use to decide to sell? (There is a lot of subjectivity)

1) Board. Are they owners or just paid to say yes to the CEO or Chairman? I like owners. Are they selling shares? (Think when Somens were selling at 20)

2) Management. Are they owners? Or salaried no matter what? I like owners. Are they selling shares? (Think when Somens were selling at 20 or when Jame Mworia sold Centum before the drop in profits)

3) Forecast/Future PE Ratio. I use the past/history to find a 'future' EPS. Subjective & many inputs go in this. The lower PE, the better. High PERs scare me. Makes me want to sell for cash or re-allocation.

4) NAV discounted by goodwill, etc. Subjective elements as well since some assets may be carried in the books at higher (e.g. goodwill) or lower (property) value than the 'real' value. What is the real value? Again, subjective. NAV per share gives you Price to Book. The lower the better. industry specific e.g. Scangroup has a high PB but that's OK.

5) Sector/Industry. Banks do well no matter what. Or so it seems!!! I made a mistake with KenolKobil. Well managed, etc but the price controls have decimated industry profits. You will see disinvestment as petrol stations shut down to give way to offices & commercial space. Suppose GoK imposes caps on banks then look at it again.

6) Dividend Yield (& Dividend Cover). BAT, EABL (until the recent expansion that is funded by debt), etc are great payers. Of course, some firms pay low dividends but grow faster. Think Berkshire Hathaway.

7) High Interest Rates. Scary. Folks sell to buy Bonds which lowers the prices. Also firms with debt suffer e.g. Unga, KK, etc. So perhaps a time to sell? Or buy banks whose interest margins jump. Very high rates will cause defaults thus hurting banks.

If I do not trust Management, the rest is irrelevant e.g. Neveready (merali), Sameer/Firestone (merali), Government Controlled firms unless very cheap (Kenya Re), etc

VVS, you ditched KPLC? (Re: Govt. controlled firms)

The time spent reading their letters is education for a lifetime.

@VVS it depends where you are holding...some stocks are still undervalued despite the recent crazy price rallies...some stocks were ignored i.e Insurance stocks, selected banks ( CFC & HF) and some selected Industrial stocks i.e TCL & KEGN etc...the rest are very much overvalued. Take e.g CFC trading at a PE of 8 like its peers TP is KES80 upside from the current price 27%....if we see further growth this year i.e 15% growth even KES80 becomes a steal. More than 90% of Equity Banks regional profits come from South Sudan...so I believe there is alot of upside for CFC in that market...now they should target Ethiopia I dont think Standard Bank SA has operations there...same with HF...trading conditions have improved...at a PE of 8 TP becomes 26...assuming growth this year then it becomes a steal.

@thedeal - CFCStanbic has underperformed vs other banks. Compare against NIC, I&M, DTB with 1/2 the assets yet similar PAT. The lower PER is deserved. As for Ethiopia, no foreign banks allowed to collect deposits so makes no sense. Buying Birr (by selling USD) to lend is a losing proposition with the depreciating Birr. The Birr is managed so the real value is lower than the CB rate.

Knock the goodwill off & the P/B jumps ;-) ... Anyway, these prices for many shares are scaring me!

After cashing out into a large cash positions unexpectedly, I have been looking for bargains. And there are few left nowadays. I have identified the following four, that i would be comfortable to invest in. 2 are set to announce losses this FY, while the other 2 are set to announce almost half the profits they made last year.

TOTAL- Undervalued, having a bad year this year. things should turn around next year. Hidden potential due to oil find. buying target. 12.00-14.00.

KENOL- Still up for sale, a buyer will come. If not. Top management, so a turn around will come through in due time. Hope i can get at 9.00

TPSE- Undervalued on a P/B basis. P/B around 0.9. This years profits may not be as good as last years. However form here on out i expect it to maintain the growth trajectory in profits it has been accumulating since 2007. Buying Target 45-55.

NBK- I expect a turnaround this year. purely Speculative though. Buying target 18.50. if she goes, let her go

Most of the good chips have been taken away from the floor. These are the ones I've identified. LETS GO.

Total- Here im banking on the turn around next year, and what TOTAL outre mer may do with TOTAL KE, they've already shown commitment with the company by increasing their stake thro' bail out last year. The preference shares is a bitter pill to swallow.

KK- agreed 2014 play

TPSEA- They should have a good H2(which is when they make most of their profits with the election cloud going away. On Europe im optimistic in the long term, effects may still be there this year and short term.

NBK- agreed. Don't try this at home

@VVS are they any bargains to be had that you can see with experienced eyes?

I've had a hard time picking out companies since January. Maybe instead of forcing issues i should divert some of the cash to bonds as Graham recommends in such times.