July 29, 2014 Issue of Ben Graham Net-Net Bargains Newsletter Is Ready

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Benjamin Graham Net-Net Working Capital Screener


What are Benjamin Graham's Net Current Asset Value Bargains?

In The Intelligent Investor, Benjamin Graham discussed the methods he used in his investment firm Graham_Newman. One is them is what he called Net-Current-Asset (Or “Bargain”) issues. He wrote:

The idea here was to acquire as many issues as possible at a cost for each of less than their book value in terms of net-current-assets alone – i.e., giving no value to the plant account and other assets. Our purchases were made typically at two-thirds or less of such stripped-down asset value. In most years we carried a wide diversification here – at least 100 different issues.

Graham’s “net current asset value” approach, apparently works very well. One research study, covering the years 1970 through 1983 showed that portfolios picked at the beginning of each year, and held for one year, returned 29.4 percent, on average, over the 13-year period, compared to 11.5 percent for the S&P 500 Index. Other studies of Graham’s strategy produced similar results.

Ben Graham loved these types of situations, defining the Net Current Asset Value (NCAV) or Liquation value as:

Net Current Asset Value (NCAV) = Current Assets - total liabilities

and Net Cash as

Net Cash = Cash and short-term investments - total liabilities

Ben Graham loved these types of situations, defining the net-net working capital (NNWC) value as:

Net-Net Working Capital (NNWC) = Cash and short-term investments + (0.75 * accounts receivable) + (0.5 * inventory) - total liabilities

Graham looked for companies whose market values were less than two-thirds of that net-net value.

With this in mind, GuruFocus has created a Graham Net-Net Working Capital screener to filter out the companies that meets the net-net value criteria. The rules are:

  • The stock prices are less than the net current asset value of the companies – Benjamin Graham. The companies with Price/NNWC between 100% to 300% are also displayed for you to get more investment ideas.
  • During the past 12 months, the companies generated positive operating cashflow. The ones with negative operating cashflow is also displayed.
  • The company has no meaningful debt compared to its cash position.
  • According to Benjamin Graham, some of these companies may well go under as economic conditions worsen, it is important to hold a diversified group of them.

The performance of the stocks can be seen in user portfolios, described in this article



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Symbol Company Price Net Current Asset Value (NCAV) Price/NCAV (%) Net-Net Working Captial (NNWC) Price/NNWC (%) Oprt. Cash Flow per share(12m) ($) Market Cap ($mil)
Premium Member OnlyPremium Member Only1.40$1.42101.4-0.3010.346
Premium Member OnlyPremium Member Only0.55$0.56101.8-0.5026.512
Premium Member OnlyPremium Member Only1.52$1.55102-0.108.855
Premium Member OnlyPremium Member Only9.88$10.09102.10.40141.193
Premium Member OnlyPremium Member Only3.76$3.85102.40.907.080
Premium Member OnlyPremium Member Only2.37$2.43102.5-0.3085.281
Premium Member OnlyPremium Member Only0.63$0.65103.20.3019.305
Premium Member OnlyPremium Member Only6.18$6.50105.20.30333.900
Premium Member OnlyPremium Member Only23.45$25.21107.51.40506.076
Premium Member OnlyPremium Member Only1.12$1.22108.9-0.1025.654
Premium Member OnlyPremium Member Only0.39$0.43110.30.00100.124
Premium Member OnlyPremium Member Only4.81$5.35111.20.6030.352
Premium Member OnlyPremium Member Only0.78$0.88112.8-0.508.500
Premium Member OnlyPremium Member Only0.68$0.77113.2-1.0011.513
Premium Member OnlyPremium Member Only1.45$1.65113.8-0.207.761
Premium Member OnlyPremium Member Only14.84$16.90113.90.7012.642
Premium Member OnlyPremium Member Only0.41$0.47114.60.00709.963
Premium Member OnlyPremium Member Only2.70$3.10114.8-0.7015.174
Premium Member OnlyPremium Member Only0.49$0.57116.30.002.940
Premium Member OnlyPremium Member Only0.36$0.42116.70.008.972
Premium Member OnlyPremium Member Only4.67$5.45116.70.0026.188
Premium Member OnlyPremium Member Only3.69$4.33117.3-1.0038.343
Premium Member OnlyPremium Member Only5.41$6.49120-6.0070.052
Premium Member OnlyPremium Member Only2.65$3.20120.8-0.509.423
Premium Member OnlyPremium Member Only0.66$0.80121.20.207.248
Premium Member OnlyPremium Member Only1.69$2.06121.91.0039.921
Premium Member OnlyPremium Member Only7.81$9.60122.9-1.3045.448
Premium Member OnlyPremium Member Only0.43$0.54125.6-0.1059.073
Premium Member OnlyPremium Member Only2.58$3.25126-0.201179.663
Premium Member OnlyPremium Member Only2.45$3.12127.3-42.0085.295

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