There are some investors who acquire stocks when their share prices are trading below their liquidation value. This investment strategy is based on the belief that it would not take a long time before Mr. Market reappraises the share prices up to a value near or above the liquidation value, yielding significant capital gains. Furthermore, shareholders will, in theory, still be able to earn a profit from the liquidation should the business go bankrupt.
The liquidation value of these so-called net-net working capital stocks is computed as "cash and short-term investments plus 75% of accounts receivable plus 50% of inventory, minus total liabilities."
Below are three stocks whose share prices are trading below their net-net working capital.
Deswell Industries Inc
The first stock short-term investors may want to consider is Deswell Industries Inc (DSWL, Financial), a Chinese manufacturer and seller of plastic and metallic molds and parts as well as electronic components to original equipment manufacturers.
The stock was trading at a price of $2.54 per share at close on Thursday, standing 3% below the net-net working capital of $2.61.
GuruFocus assigned a score of 9 out of 10 to the company's financial strength rating and a score of 4 out of 10 to its profitability rating.
Following a 3% decline over the past year, the stock has a market capitalization of $40.44 million and a 52-week range of $2.02 to $3.09.
The company's top fund holder is Morgan Stanley with 1.99% of shares outstanding. It is followed by InterOcean Capital, LLC with 0.49% and RBF Capital, LLC with 0.19% of shares outstanding.
One analyst on Wall Street issued a hold recommendation rating for this stock with a target price of $7.75 per share.
Jupai Holdings Ltd
The stock was trading at a price of $1.71 per share at close on Thursday, which is 5.5% below the net-net working capital of $1.81.
The company holds a GuruFocus financial strength rating of 6 out of 10 and a profitability rating of 7 out of 10.
As a result of a 29.6% decrease over the past year, the stock has a market capitalization of $57.64 million and a 52-week range of $0.88 to $2.65.
The company's top fund holder is UBS GLOBAL ASSET MANAGEMENT AMERICAS INC with 9.81% of shares outstanding, followed by Jim Simons (Trades, Portfolio) with 0.46% and Advisory Services Network, LLC with 0.12% of shares outstanding.
One analyst on Wall Street has recommended a buy rating with a target price of 96.50 Chinese yuan (about $14.14) per share for this stock.
Rubicon Technology Inc
The third stock short-term investors may want to consider is Rubicon Technology Inc (RBCN, Financial), a Bensenville, Illinois-based provider of monocrystalline sapphire for applications in optical and industrial systems.
The stock was trading at a price of $8.60 per share at close on Thursday, which is about 19.5% below the net-net working capital of $10.69.
GuruFocus assigned a score of 8 out of 10 to the company's financial strength and a score of 2 out of 10 to its profitability.
After a 5.4% decrease in the share price over the past year, the market capitalization is $20.68 million and the 52-week range is $7.15 to $10.09.
On Wall Street, the stock has a hold recommendation rating with an average target price of $7.50 per share.
Bandera Partners LLC is the leader amid the company's top fund holders as it holds 10.85% of shares outstanding, followed by Jim Simons with 4.92% and Roumell Asset Management, LLC with 4.01%.
Disclosure: I have no positions in any securities mentioned.
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