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.

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

To: Rainmaker888 who wrote (39383)	9/22/2010 3:26:59 PM
From: Paul Senior	2 Recommendations Read Replies (1) \| Respond to of 78732

cash question: I'd say it depends on the company. For a growth company, I'd value lot of cash as a negative. That is, if they are growing why are they holding cash instead of reinvesting in the business or returning excess to shareholders? For net-net companies, it's a positive. You'd be trying buying the stock to get $1 cash for fifty-cents. For value investors, cash would be one margin-of-safety aspect. I assume though, that value investors are a minority, and that "the market" wouldn't value cash that highly. ======================================== Is it something like this that's hurting this USA now?: Everybody afraid of something or another, so we have companies and individuals sitting on what - a $trillion in cash assets? Maybe it isn't that the market doesn't value cash. It's that people don't value the market. Buying stocks is out of favor. Too many people just holding on to their own cash...or trying to.

To: Rainmaker888 who wrote (39383)	9/23/2010 12:00:43 AM
From: Spekulatius	Respond to of 78732

re (net?) Cash on balance sheet. in my opinion, cash on the balance sheet is worth more than zero but each $ on the balance sheet is worth less than a $ in market cap. Here are the reasons why: a) there is a good chance that the cash is used for something stupid, most likely an acquisition or stock buybacks when shares are fairly high. Companies with a lot of cash tend to be poor capital allocators. b) Even if a) is not applicable the money may be "trapped" in a foreign subsidary and the only way to move it home to do something with it would be to pay extra taxes in the US. MSFT is an example of that. I have seen a few cashes during the credit crunch when a $ on the balance sheet was worth more than a $ in market cap. This happened with REITs that raised money in secondaries. The market responded favorable to the REIT having more cash available and seemed to assign them a higher market cap. Those were pretty exceptional circumstances, though.