(Oct 20): Eric Cinnamond had 75 percent of the money in his mutual fund in cash at the end of July because he couldn’t find enough cheap small-company stocks to buy. The stock-market selloff this month hasn’t changed his mind.

“While the recent decline is refreshing, in my opinion, small caps remain expensive given the insane heights they reached this cycle,” Cinnamond, manager of the $691 million Aston/River Road Independent Value Fund, wrote in an e-mail.

A global rout in stock markets has wiped $3.3 trillion from the value of equities worldwide this month through Oct. 16 and the Standard & Poor’s 500 Index has slumped 6.2 percent since reaching a peak for the year on Sept. 18. The plunge hasn’t been enough for Cinnamond and other money managers who hold unusually high levels of cash, such as Stephen Yacktman of Yacktman Asset Management LP and Wally Weitz of Weitz Investment Management Inc., who say bargains still aren’t easy to find.

“It’s not as if the world is all of a sudden dirt cheap,” Keith Trauner, co-manager of the $509 million GoodHaven Fund, said in a telephone interview from Miami. “It’s becoming more reasonable,” said Trauner, whose fund had 28 percent of its assets in cash as of May 31.

The caution of the stock pickers isn’t matched by debt investors. Firms from Pacific Investment Management Co. to Blackstone Group LP say they are poised to scoop up speculative- grade corporate bonds after yields rose to the highest level in more than a year. They’re looking for bargains after building up the biggest hoard of cash in almost three years.

Stocks Plunge

Stocks worldwide have plunged in October amid concern that economic growth in Europe and China is slowing and the U.S. winds down asset purchases. The slump also reflects fears about the effect of the spread of Ebola and a decline in energy stocks after oil prices reached bear-market territory.

The S&P 500’s decline has pared its gain for the year to 2.1 percent as of Oct. 17. The Russell 2000 Index, a benchmark for smaller stocks, is down 6.8 percent for the year and 10 percent below its 2014 peak reached in March. Energy is the worst performing industry in the S&P 500 in October, declining 8.2 percent this month, according to data compiled by Bloomberg.

Value-minded investors such as Cinnamond and Yacktman, who look for stocks that are cheap compared with a company’s earnings prospects, will build up cash when they can’t find enough securities that meet their standards. The average U.S. equity fund holds about 3.5 percent its assets in cash, data from Chicago-based Morningstar Inc. show.

Buffett, Klarman

Warren Buffett’s Berkshire Hathaway Inc. held more than $50 billion in cash at the end of June, the first time it finished a quarter above that level since he became chairman and chief executive officer more than four decades ago.

Buffett has said he is waiting for a “fat pitch,” his phrase for an opportunity to buy a stock at a favorable price. He said this month in Fortune’s Most Powerful Women Summit that most of the time, stocks tend to trade in what he calls “the zone of reasonableness” and that he’ll get a chance every five to ten years to make a definitive statement.

“There is a big zone of reasonableness and anybody who thinks they can pinpoint it is crazy,” Buffett said during the conference.

Seth Klarman, founder of Boston-based Baupost Group LLC, had almost 40 percent of his hedge fund in cash at the beginning of the year, according to his 2013 year-end letter to shareholders. Klarman is a bargain hunter who wrote the preface to the sixth edition of “Security Analysis,” a landmark 1934 book by Benjamin Graham on value investing.

‘Lost Capital’

“We prefer the risk of lost opportunity to that of lost capital,” Klarman wrote in a letter to clients a decade ago.

Buffett didn’t respond to a message left with an assistant seeking comment on Berkshire’s cash hoard. Klarman declined to comment on his view of the market.

Cinnamond has a history of piling up cash. At his last job, as manager of the Intrepid Small Cap Fund he boosted cash in 2007, saying that small-cap names were expensive. The decision helped Cinnamond beat 96 of peers in 2007 and 99 percent in 2008 as small stocks tumbled. Cinnamond ran the Intrepid fund until 2010.

“I was fully invested in March 2009,” he said in a telephone interview from Ponte Vedra, Florida, referring to the low point for the stock market.

At the Aston fund, his cash levels have climbed sharply, which caused him to trail more than 99 percent of rivals last year, according to data compiled by Bloomberg. This year, he is beating 92 percent. Cinnamond said small stocks would need to fall an additional 30 percent to 50 percent to bring their valuations down to normal historical levels.

“These stocks are nowhere near the price they need to be for us to be aggressive buyers,” he said.

‘Asinine’ Valuations

Jayme Wiggins, who succeeded Cinnamond on the $650 million Intrepid Small Cap Fund in 2010, shares his predecessor’s concerns. Wiggins, who had 74 percent of his fund in cash as of Sept. 30, has been able to put a little of that money to work recently in energy stocks, which he said, “have felt more pain.”

“Small-cap valuations are still quite asinine,” he wrote in an e-mail.

The Russell 2000 Energy Index is down 24 percent for the year, according to data compiled by Bloomberg. Oil has slipped into a bear market as shale supplies boost U.S. output to the highest level in almost 30 years amid signs of weakening global demand.

‘Wish List’

Matt Lamphier, a manager at the $3 billion First Eagle U.S. Value Fund, has also found some bargains in energy of late. He can’t find them elsewhere in the market, he said in a telephone interview from New York. The fund, which has about 18 percent of its assets in cash, hasn’t been an aggressive buyer of stocks since 2011, the last time the broader market fell significantly, said Lamphier.

“We have a wish list of stocks, but we need to see prices a bit lower than they are before we would buy,” he said.

Weitz, who manages more than $5 billion in mutual funds and separate accounts, has pared cash levels in his funds by 5 to 10 percentage points since they peaked at about 30 percent in the third quarter, he said.

Weitz, whose $1.1 billion Weitz Partners III Opportunity Fund beat 97 percent of peers over the past five years, said he has found a few new companies to buy in the past few days.

“But it’s nothing like 2008 and 2009 where bargains were screaming at us,” he said in a telephone interview from Omaha, Nebraska.

Fruit Picker

Yacktman, chief investment officer at Austin, Texas-based Yacktman Asset Management, has been telling investors for the past few quarters that stocks in general were expensive. In one conference call, he likened the plight of a stock picker in today’s market to that of a fruit picker, high up on a ladder. In both cases, there is not much to pick and the job has become more dangerous. The $10.6 billion AMG Yacktman Focused Fund, held 16 percent of its assets in cash as of Sept. 30, according to the fund’s website.

“We are glad to see it,” he said of the recent market selloff, in a telephone interview. “It brings us back into the game.”

At the Goodhaven Fund, Trauner said the best time to buy stocks is when markets are depressed.

“Although we wish ill will on nobody, the best opportunities usually show up after some segment of investors has suffered -- and we are working hard to make sure that we’re not the ones in great pain,” he and his co-manager Larry Pitkowsky told shareholders in their semi-annual report.