Re: Porfolio allocation strategy
In the first case you have $200m ev and the second $0m ev. In the first case you have an investment with lots of leverage, the second has a business the market thinks is dead.
Personally, I look at allocations based on business risk. If co. 1 had huge cash flow and co. 2 questionable mgmt, I might view #1 as less risky. I think you should incorporate net debt into your risk analysis, but I don't think you can algorithmically allocate based on it.
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