There are some investors who purchase stocks that are trading below their liquidation value because they believe they can make impressive gains out of their investments after the market has reassessed the share prices near or above the liquidation value. Should the company fail, these shareholders would, in theory, still be able to make money due to a difference between the liquidation value and purchasing price.
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."
Thus, short-term investors may want to consider the following stocks as their share prices are lower than their net-net working capital.
Athira Pharma
The first stock to consider is Athira Pharma Inc. (ATHA, Financial), a Seattle-based clinical-stage biopharmaceutical developer of small molecules for the treatment of Alzheimer's and Parkinson's diseases, as well as depression and peripheral neuropathy.
The stock was trading at a price of $21.7 per share at close on Friday, standing well below the net-net working capital of $28.79 as of the September 2020 quarter.
GuruFocus assigned a score of 5 out of 10 to the company's financial strength and of 1 out of 10 to its profitability.
As a result of a 26.83% increase that happened over the past year, the stock has a market capitalization of $791.73 million and a 52-week range of $15.79 to $34.79.
Perceptive Advisors LLC is the leader amid the company's top fund holders with 9.59% of shares outstanding. It is followed by RTW Investments LLC with 8.21% and Andreas Halvorsen (Trades, Portfolio) with 6.53%.
On Wall Street, the stock has a median recommendation rating of buy with an average target price of $44.25 per share.
ARCA Biopharma Inc
The second stock short-term investors could be interested in is ARCA Biopharma Inc. (ABIO, Financial), a Westminster, Colorado-based biopharmaceutical developer of genetically targeted therapies for cardiovascular diseases.
The stock was trading at a price of $5.18 per share at close on Friday, which is below the net-net working capital of $5.33 as of the September quarter.
GuruFocus assigned a score of 5 out of 10 to the company's financial strength and of 1 out of 10 to its profitability.
As a result of a 3.16% decline over the past year, the stock has a market capitalization of $48.29 million and a 52-week range of $2.21 to $22.
BlackRock Inc. is the leader amid the company's top fund holders with 3.08% of shares outstanding. It is followed by Simons' firm with 2.20% and GSA Capital Partners LLP with 0.49%.
On Wall Street, the stock has one buy recommendation rating with a target price of $7 per share.
Metacrine
The third stock short-term investors could be interested in is Metacrine Inc. (MTCR, Financial), a San Diego-based clinical-stage biopharmaceutical developer of therapies for patients with non-alcoholic steatohepatitis.
The stock was trading at a price of $10.82 per share at close on Friday, which is significantly below the net-net working capital of $74.54 as of the September quarter.
GuruFocus assigned a score of 5 out of 10 to the company's financial strength.
As a result of a nearly 8% decrease that occurred in the share price over the past year, the market capitalization now stands at $280.85 million and the 52-week range is $7.64 to $16.19.
On Wall Street, the stock has a median recommendation rating of buy with an average target price of $20.50 per share.
Disclosure: I have no positions in any securities mentioned.
Read more here:
- 3 Large-Cap Stocks Trading Below the Graham Number
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