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Stingy Investor Tip Sheet
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| 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good as Montier showed in his article "Graham's net-nets: outdated or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 ...
If you're a current subscriber,
login to see the tables.
If not, subscribe today!
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| | 12/2/2011 7:30 PM EST Permlink save & share | Value Investing |
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