Tsachy Mishal's  Instablog

Tsachy Mishal
Send Message
Tsachy Mishal is the Portolio Manager at TAM Capital Management Inc.. He is the author of the investment blog Capital Observer. http://www.capitalobserver.com/
My company:
TAM Capital Management Inc.
My blog:
Capital Observer
  • The AOL Example 0 comments
    Feb 10, 2011 8:09 AM | about stocks: AOL

    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.

    Stocks: AOL
Back To Tsachy Mishal's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers


More »
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.