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 Only0.14$0.31221.40.0074.500
Premium Member OnlyPremium Member Only0.16$0.43268.80.0028.662
Premium Member OnlyPremium Member Only0.16$0.47293.8-0.2041.064
Premium Member OnlyPremium Member Only0.16$0.38237.5-0.1030.853
Premium Member OnlyPremium Member Only0.19$0.53278.90.0049.728
Premium Member OnlyPremium Member Only0.20$0.492450.00298.606
Premium Member OnlyPremium Member Only0.20$0.41205-0.1015.313
Premium Member OnlyPremium Member Only0.21$0.31147.60.001.752
Premium Member OnlyPremium Member Only0.22$0.47213.6-2.6087.091
Premium Member OnlyPremium Member Only0.24$0.69287.5-0.1027.351
Premium Member OnlyPremium Member Only0.25$0.461840.00246.756
Premium Member OnlyPremium Member Only0.26$0.49188.50.1091.281
Premium Member OnlyPremium Member Only0.27$0.46170.4-0.3014.673
Premium Member OnlyPremium Member Only0.28$0.78278.60.3040.652
Premium Member OnlyPremium Member Only0.29$0.47162.10.10188.315
Premium Member OnlyPremium Member Only0.29$0.54186.20.2024.734
Premium Member OnlyPremium Member Only0.29$0.64220.7-0.2042.032
Premium Member OnlyPremium Member Only0.31$0.54174.2-0.2065.085
Premium Member OnlyPremium Member Only0.31$0.64206.5-0.4030.533
Premium Member OnlyPremium Member Only0.33$0.36109.1-0.101.250
Premium Member OnlyPremium Member Only0.34$0.57167.60.0097.166
Premium Member OnlyPremium Member Only0.36$0.58161.10.00179.216
Premium Member OnlyPremium Member Only0.36$0.40111.10.008.565
Premium Member OnlyPremium Member Only0.36$0.53147.20.0062.154
Premium Member OnlyPremium Member Only0.37$0.86232.40.006.495
Premium Member OnlyPremium Member Only0.37$0.59159.5-0.1051.719
Premium Member OnlyPremium Member Only0.38$0.80210.50.0016.364
Premium Member OnlyPremium Member Only0.39$0.98251.3-0.5027.195
Premium Member OnlyPremium Member Only0.40$0.71177.5-0.2043.188
Premium Member OnlyPremium Member Only0.40$0.61152.5-0.3019.022

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