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Stingy Investor Tip Sheet
|Graham Net Nets|
Last week I was sifting through Net Net stocks. These are stocks
trading at a discount to current assets less all liabilities. Ben
Graham originally suggested stocks trading at 66% of their Net Net
value. I was a little more generous and started my search at 70% or
less of Net Net. (Net Net = current assets less all liabilities).
It should come as no surprise that there are relatively few Net Net candidates
and they tend to be very small stocks indeed. But as I mentioned to Ian,
Graham's value stocks do exist.
Currently, there are about 700 candidates world-wide according to
Bloomberg. But data on these very small stocks tends to be uneven at
best. Indeed, looking for Net Nets can be a good way to uncover database
errors and bankrupt companies. Nonetheless, you can occasionally spot
a gem or two.
But, before diving in, make sure you go the extra mile to check the
data and beware that many of these stocks are extraordinarily
illiquid. In such cases, market orders can lead to poverty. Buying
stocks indiscriminately from a Net Net list can be dangerous.
If it's dangerous, why bother? Because the returns have been quite
good as Montier showed in his article "Graham's net-nets: outdated or
outstanding?" which is in his book "Value Investing". (Hint: The
answer is outstanding.) You just have to sort through the dross.
The two tables below present raw data. To help discriminate between
the bankrupt companies and those that are not quite dead yet, I've
sorted them by Market Capitalization from high to low. It's not
perfect but broken companies usually appear lower down on the list.
Also, for NASDAQ stocks, a trailing Q in a 5 letter ticker symbol is a
Here are, the surprisingly long, lists of Canadian and U.S. stocks that
pass the Net Net test ...
If you're a current subscriber,
login to see the tables.
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|02/08/2010 7:30 PM EST Permlink save & share||Value Investing|