Irwin Michael, portfolio manager for ABC Funds, says he’s having a hard time finding undervalued stocks in Canada right now.

In his latest commentary, value investing die hard Michael says, “We are still fundamentally bullish on equities, however, we are finding some difficulty in uncovering undervalued Canadian common stocks.”

He notes that the cash position in the three ABC Funds is about 20% which reflects his present investment caution. ABC plans to reduce the cash component to about 10% over the next several months.

Over the past month, ABC has sold positions in Dundee Bancorp, Russell Metals, Strongco Inc. and Promax Energy. It has added to its holdings of Devlan Exploration, MFP Financial, Regional Cable and Lone Star Steakhouse.

Michael says that although the string of rate cuts has sparked a bounce back in markets, ABC is still concerned about a softening economy, building inflation, relatively weak corporate profits outlook and an overvalued U.S. dollar. Although it expects that the rate cuts will revive the U.S. economy, it sees some negative fallout. “These effects would be manifested in the form of higher inflation, increasing labour unrest, rising interest rates and a weaker U.S. dollar.”