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October 25, 2006 A "Bubble" of Cash Flow Positive Companies?
Given the pace over the last 18 months of "merger mania", we are all looking
for signs of the 'bubble'. DOW at 12k+ anyone? It hasn't shown up in the public markets, yet is
it simply a wolf in sheep's clothing? We all look at the public markets and
say that the craziness has definitely not returned to the NASDAQ, the public
markets remain basically closed and year over year equity returns are within
a reasonable range. However, I tend to wonder if the 'bubble' of today's
market is simply a 'bubble' of cash flow positive companies - brick and mortar
companies with consistent revenue growth. The very companies that everyone
has been chasing since the crash in 2000. The tech bubble was driven by
strategic acquirers and everyone could watch the craziness in the stock
market. Today's bubble may well be a silent killer, less visible as the
acquirers are not publicly held entities but rather financial buyers chasing
returns and putting capital to work. If the roles were reversed would we all
be buying puts?
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