Savvy Trades and Investments

[Mermelstein]

Anything below 1 would be really cheap as the cash on hand would be worth more than the current market cap. Depending on the business I’d say anything below 1.5 or 2 is cheap. Most companies aren’t keeping a lot of cash on hand in a low interest rate environment. Depending on the business it’s hard to define expensive also…lots of companies can operate with very little cash requirements if they have access to credit facilities.

And usually companies that are trading at low ratios like this have other problems…sometimes they don’t but the market isn’t generally stupid. It’s a question of how many warts you’re willing to accept.