There are investors who purchase shares of stocks that are trading below their liquidation value in the belief that they can make huge gains out of their investments after the market has reassessed the share prices up to the true value or above in the short term.
The liquidation value (true value) of these so-called net-net working capital stocks is computed as cash and short-term investments plus 75% of receivables, 50% of inventory and minus total liabilities.
Here are some results of my research for stocks trading below their net-net working capital:
Asia Pacific Wire & Cable
The first stock to consider is Asia Pacific Wire & Cable Corp. Ltd. (APWC, Financial), a Taiwanese manufacturer and distributor of telecommunications, power and electronic cables in Australia, China and other Asian markets, including Singapore and Thailand.
The stock was trading at $1.08 per share in early trading on Tuesday, which is largely below the net-net working capital of $7.14 calculated based of figures from the most recent quarter's balance sheet.
The company holds a GuruFocus financial strength rating of 6 out of 10 and a profitability rating of 4 out of 10.
Following a 47% decline over the past year, the stock has a market capitalization of $15.63 million and a 52-week range of 89 cents to $2.34.
The company's top fund holders are Bourgeon Capital Management LLC with 0.13% of shares outstanding and UBS Group AG with 0.01%.
Forward Pharma
The second stock under consideration is Forward Pharma A/S (FWP, Financial), a Danish biopharmaceutical developer of proprietary formulation treatments for inflammatory and neurological symptoms.
The stock was trading at $5.99 per share in early trading on Tuesday, approximately 47% below the net-net working capital of $11.21 as of the first quarter.
The company holds a GuruFocus financial strength rating of 7 out of 10 and a profitability rating of 2 out of 10.
As a result of 15.3% downturn over the past year, the stock has a market capitalization of $41.28 million and a 52-week range of $4.61 to $12.72.
Wall Street sell-side analysts have recommended a hold rating for this stock.
Support.com
The third stock to have a look at is Support.com Inc. (SPRT, Financial), a Sunnyvale, California-based software application provider in the U.S.
The stock was trading at $1.37 per share in early trading on Tuesday, or about 10% below the net-net working capital of $1.52 as of the quarter ended March 31.
The company holds a GuruFocus financial strength rating of 8 out of 10 and a GuruFocus profitability rating of 2 out of 10.
After an 11.6% decline, which occurred over the past year, the market capitalization is now $25.91 million, and the 52-week range is 93 cents to $2.78.
Wall Street sell-side analysts have recommended a hold rating with an average target price of $3 per share.
The company's top fund holder is Fondren Management LP with 6.83% of shares outstanding, followed by Jim Simons' Renaissance Technologies with 5.30% and Vanguard Group Inc. with 4.71%.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- 3 Stocks Trading Below the Graham Number​
- A Trio of Stocks Trading at a Discount
- 3 Low Shiller Price-Earnings Ratio Picks
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