Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Safeguard Scientifics SFE -- Ignore unavailable to you. Want to Upgrade?

To: Katherine Derbyshire who wrote (3376)	8/23/1999 2:33:00 PM
From: Katherine Derbyshire	Read Replies (1) \| Respond to of 4467

Since my earlier note, I've thought about the TLAB problem some more. I look at it this way: for a struggling company to hold large amounts of cash is good, as the cash is a hedge against bankruptcy and puts a floor under the stock price. For a very successful company to hold large amounts of cash is bad, since the company generates larger returns from its business than cash sitting in the bank does. As cash dominates the balance sheet, the total return of the company drops. (This came up in connection with MSFT a few years ago.) Likewise, SFE should be able to generate larger returns from its VC investments than it gets from TLAB, so it should reduce its TLAB holdings to free up more capital for VC. If SFE's VC portfolio isn't able to outperform TLAB, than SFE is not delivering on its promises to its shareholders. Sell it and buy TLAB instead. Katherine