The Ben Graham: Net-Net Newsletter’s April’s pick is a technology company in the medical device industry that has weathered many storms and remained profitable. The thesis is simple, 80% of the market cap is cash, and an EV/EBIT of 0.82. Earnings and book value have been growing, a hidden gem for sure.
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This month’s pick:
· The company trades at 80% of NCAV and 68% of book value.
· The company has a P/E of 5.75
· Cash rich, cash equals 80% of the company’s market capitalization.
· Looking past excess cash the company is extremely cheap with an EV/EBIT multiple of .82x.
· Profitable during the financial crisis even with a significant drop off in revenue in 2010.
· The company has shown their agility by changing their market strategy successful in response to industry challenges.
“It always seemed, and still seems, ridiculously simple to say that if one can acquire a diversified group of stocks at a price less than the applicable net current assets alone...the results should be quite satisfactory. They were so, in our experience, for more than 30 years.”- Ben Graham
What’s a Net-Net?
A net current asset value bargain—or net-net—is a stock selling for less than the value of its current assets—cash, receivables, and inventory—minus all liabilities. Basically, it’s a stock selling for less than its liquidation value.
What’s the Ben Graham: Net-Net Newsletter?
GuruFocus’s Ben Graham: Net-Net Newsletter is written by Nate Tobik. It picks one new net-net every month. The newsletter goes out to subscribers on the first Friday of the month. The newsletter looks for stocks that have both a tangible margin of safety and reasonable upside potential.