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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Madharry who wrote (38657)	7/31/2010 11:38:32 AM
From: MCsweet	1 Recommendation Read Replies (2) \| Respond to of 78740

GFRE, I think organic growth versus acquisitions requiring capital raises is an important point to discuss. You have addressed it with some very well thought out arguments, but I'd like to chip in as to why I think the discussion is important. In general, I don't trust companies with seemingly cheap valuations raising capital. It begs the question - if the managers think the stock is so cheap why are the selling more of it at bargain-basement prices? Maybe the stock isn't as good a value as it appears. Unless there is a huge business opportunity requiring the capital, I think investors are usually better off if undervalued companies bought back stock or just keep things as is, rather than issuing new stock. I can agree that for certain companies the opportunities are so great that raising money is worth the cost of dilution. That appears to be the case here. However, I will also point that most times the benefits of acquisitions never meet expectations. And just because a company has been successful with acquisitions in the past, doesn't mean it will continue to do so in the future. I believe most of us, both in investing and in business, are at our most susceptible point after a period of successes. That being said, I of course would rather be on board with a company with a history of successful acquisitions than a company with a spotty track record. MC