Since it's so quiet...How low could SFE go? I wouldn't presume to be able to answer that, but...one should consider the possibility SFE could trade lower than is now commonly presumed-just from a common sense standpoint. The 12 mo. range is $16-$99. What has changed in the last year that would prevent SFE from trading again at something like 2X or 3X last years low [$16 X 2] $32 [$16 X 3] $48 under the "right" circumstances. One answer, ICGE has come out. Yet, ICGE has been falling for months. When ICGE came out, I thought a generous valuation for ICGE would be $10B. Blessedly, the market saw fit to push it to $50B. I still don't believe it is worth more than $10B-actually less. This is opinion only based on experience and relative valuation with all stocks. Well paid analysts would argue a much higher value, and they could be right-I disagree. But the point is, if that opinion is correct, and the market eventually values it closer to what I consider a more realistic level, it may not lend much NAV support to SFE. The next 12 mo. will see a big shakeout among internet stocks. The market is now in the process in determining eventual winners from the losers. The losers will far outnumber the winners and they are toast. Why? They are losing money-will continue to lose money-have a high cash burn rate, and will run out of cash. The market will be disciplined in not providing financing for those tagged "also rans". [This not based on the recent Barrons article which I have not read]. The market will provide necessary follow up financing for those it believes to be eventual winners. But, even in these cases, the market is in the process of correcting what became manic valuations. I think the AOL-Time Warner deal was the watershed event that linked internet stocks and valuations to the real world.
We are soon entering a time of year that has not treated technology or internet stocks kindly. Last year even within the mania that was building steam, internet stocks lost 50% from high to lows. Because of the above reasons, I have not bought back SFE shares sold. It may mean missing out if last weeks low of lower $60s was the last great chance to get on board. I am willing to live with that. Again, this is not a prediction of SFE going to $30, $40, or $50, but just a bit of personal perspective to provide thought and promote discussion. I also reserve the right to change my mind without warning and buy if conditions warrant. I don't expect to do that at these prices, but-it's the market, not an ego contest of "I'm right and I'll go down in flames to prove it". I also recognize that Safeguard [still my largest $ position and all time favorite company] has done many good things in the past 12 mo. other than just get ICGE monetized. I'd just be careful in presuming that a company-even as good as SFE is a great buy at $70 when it was trading at $16 a year ago. Things haven't changed that much-only perceptions have-and they are subject to re-evaluation. thanks, Mike |
