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Tsachy Mishal's  Instablog

Tsachy Mishal
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Tsachy Mishal is the Portolio Manager at TAM Capital Management Inc.. He is the author of the investment blog Capital Observer.
My company:
TAM Capital Management Inc.
My blog:
Capital Observer
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  • The AOL Example
    AOL is a great example of why I insist on knowing what companies plan to do with their cash, even if the stock trades cheap. Many value investors have been buying AOL based on the fact that they trade at a little over three times free cash flow once one takes out the $7.50 in cash sitting on the balance sheet.

    The stock would be a no brainer if it were not for the fact that the CEO is spending the cash like a drunken sailor. The multiple of free cash would be even lower if the company were not wasting money on things such as a fancy headquarters in Downtown Manhattan. The company has paid high prices for Tech Crunch and The Huffington Post even though nobody has figured out how to make money off of content on the Internet.

    The AOL example is the reason that I not only insist that a stock trades cheaply but also that I know what management plans to do with the money. Making money and burning it is the same as not making the money at all.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Tags: AOL
    Feb 10 8:09 AM | Link | Comment!
  • A Genzyme Deal Would Be A Boon For Large Cap Biotech
    Genzyme signed a confidentiality agreement with Sanofi signaling that the two sides are close to a deal. While a higher price would likely boost sentiment in the large cap biotech sector, I believe that a deal would be beneficial to the sector regardless of the price.

    There are only five biotech stocks with a market cap greater than $10 billion and Genzyme is one of them. It makes up over 11% of the market cap of this group. The group consists of Amgen, Gilead, Celgene, Genzyme and Biogen. Amgen, Gilead and Biogen are are all buying back stock aggressively. The float of shares in the large cap biotech industry is shrinking quickly and  a Genzyme deal would speed up the process. I believe that an attractive valuation and a positive supply and demand profile for the shares will lead to higher prices for the entire sector.

    I have bought Gilead and Amgen to take advantage of this dynamic. After the recent decline shares of Celgene are also attractively valued but I have not purchased them yet as there is a lot of momentum money fleeing the name and they are not aggressively repurchasing shares.
    Jan 31 6:00 PM | Link | Comment!
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