Nice reprint of someones article. Interesting.
Truth is that a company that only has cash isn't willing or able to make any deals that they think will bring high returns. At some point, this does show inefficiency.
[quote:63eca63d42="HappyHarry"]Truth is that a company that only has cash isn't willing or able to make any deals that they think will bring high returns. At some point, this does show inefficiency.[/quote:63eca63d42] Exactly. It shows that the company either has no other projects that will bring them higher returns or it shows that they are saving up their money to pay for a lawsuit settlement or a severe downturn. Sometimes, firms will buy back their own shares, and that's either a sign of confidence of their own stock or an indication that they really don't have no profitable projects other than stock manipulation.
Stock buyback is probably a pretty good use of cash, but certainly not the best. Better to have companies that make good margins but pump the cash into expansion because of rapid growth.