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Stingy Investor Tip Sheet

Graham Net Net December Update

I've refreshed the list of Canadian and U.S. Net Net stocks due to popular demand. 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 more generous and started my search at 100% or less of Net Net.

You'll remember that a stock's Net Net is equal to its 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. 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 or 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 Because the returns have been quite good as Montier showed in his article "Graham's net-nets: outdated or outstanding?"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 can be found 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 bad sign.

Here are the lists of Canadian and U.S. stocks that pass the Net Net test ...

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12/2/2011   7:30 PM EST   Permlink   save & shareValue Investing

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