No. of Recommendations: 3
* Subtract 30% of float per share as a rough estimate of the overall long run drag on portfolio returns from always having to hold a lot of cash. Not the same as assuming 30% of float will be in cash.
Just trying to understand what you mean by this, 2 questions:
(1) Why subtract any of it, since cash is not really cash? Substantially all the 'cash' is actually in short-term treasuries earnings a few percent, so why not just count it as an asset at face value?
(2) Of course any insurance company is going to have all or most of its float invested in fairly short-term fixed income securities, and this represents a drag on returns as opposed to a holding company that has all its capital invested in companies or equities. But if you have a $100 loan that you never have to pay back but can invest at 3%/year in the meantime, isn't it worth roughly $100?
Regares, dtb
