June 6, 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 Only0.24$0.44183.30.00268.165
Premium Member OnlyPremium Member Only0.36$0.66183.3-0.10100.560
Premium Member OnlyPremium Member Only1.10$2.02183.6-0.1055.220
Premium Member OnlyPremium Member Only2.72$5.00183.8-2.90109.933
Premium Member OnlyPremium Member Only0.25$0.46184-0.3014.673
Premium Member OnlyPremium Member Only0.20$0.371850.0031.863
Premium Member OnlyPremium Member Only0.76$1.41185.50.3011.228
Premium Member OnlyPremium Member Only4.52$8.53188.70.4057.965
Premium Member OnlyPremium Member Only1.09$2.06189-0.9041.388
Premium Member OnlyPremium Member Only13.41$25.351892.90239.063
Premium Member OnlyPremium Member Only3.14$6.02191.7-1.4026.039
Premium Member OnlyPremium Member Only0.25$0.481920.00255.026
Premium Member OnlyPremium Member Only2.65$5.10192.5-1.2087.421
Premium Member OnlyPremium Member Only0.57$1.10193-0.1016.747
Premium Member OnlyPremium Member Only1.29$2.50193.80.0059.600
Premium Member OnlyPremium Member Only7.19$13.94193.91.501071.417
Premium Member OnlyPremium Member Only1.62$3.15194.4-1.8046.915
Premium Member OnlyPremium Member Only2.90$5.64194.5-0.70238.753
Premium Member OnlyPremium Member Only3.15$6.14194.9-0.9079.443
Premium Member OnlyPremium Member Only1.59$3.13196.90.4011.730
Premium Member OnlyPremium Member Only2.78$5.49197.50.4038.278
Premium Member OnlyPremium Member Only2.84$5.61197.5-0.40293.721
Premium Member OnlyPremium Member Only0.86$1.70197.7-0.9022.345
Premium Member OnlyPremium Member Only1.71$3.39198.2-0.40193.545
Premium Member OnlyPremium Member Only4.91$9.77199-0.30206.395
Premium Member OnlyPremium Member Only2.61$5.20199.20.30119.400
Premium Member OnlyPremium Member Only3.00$5.99199.70.101793.017
Premium Member OnlyPremium Member Only0.22$0.44200-0.2014.691
Premium Member OnlyPremium Member Only0.38$0.76200-0.1066.306
Premium Member OnlyPremium Member Only2.77$5.55200.4-0.3035.622

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