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Technology Stocks : Safeguard Scientifics SFE
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To: gdichaz who wrote (3370)8/21/1999 8:39:00 PM
From: Katherine Derbyshire  Read Replies (1) of 4467
 
>> Would hope that SFE management would give higher priority
to strengthening winners than helping the wounded survive.

Build on strength and sell the weak is a good general rule.

The danger is that SFE thinks of itself as a doctor who heals, as opposed to a
generator of winners. <<

But how do you tell which ones are the winners?

Going back to the medical analogy, you could start with identical twin babies, both born healthy and strong. If you feed one and don't feed the other, the neglected one will die. It takes 15-20 years or more to figure out whether one or both of them will succeed. Do you quit feeding one of them because he cries more than the other?

Baby companies grow up faster than baby humans, but they still all face a stage where they cry a lot and will die without management, capital, and all the other "food" uncle SFE provides.

All of this shows where the common analogy between SFE and a closed end mutual fund breaks down. The fund can't really influence the direction of the companies it buys, while SFE can. So you could view the premium (or discount) over NAV as the value of the private companies *plus* the value of SFE's expertise. Any statisticians out there have a good metric for that expertise?

Katherine
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