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Mitchell Mauer
Mitchell Mauer
Articles (64) 

Buy These 5 Stocks for Less Than Liquidation Value

These stocks qualify on the net-net working capital screen

November 09, 2016 | About:

These five top stocks qualify for the Net-Net Working Capital (NNWC) screen.

NNWC is similar to the NCAV screen except it is more stringent. Benjamin Graham knew that companies undergoing liquidation would not necessarily sell all current assets at book value.

In order to add a level of safety, he felt it beneficial to discount the accounts receivables and inventories when calculating current assets.

NNWC description

Like NCAV, NNWC finds stocks trading for less than the difference between current assets minus total liabilities, and no regard is given to the company’s long-term assets or future profits.

But where NCAV accounts for 100% of a company’s current assets, NNWC builds a larger margin of safety by discounting both receivables and inventory.

Liquidation value

To calculate the liquidation value of a stock using NNWC, the stock screen values a firm’s current assets at the following levels:

  • Cash & Cash Equivalents: 100%
  • Accounts Receivables: 75%
  • Inventories: 50%
  • Long-Term Assets: 0%

Top ranked NNWC stocks

Here is a breakdown of five stocks with the lowest price to NNWC, according to TheStockMarketBlueprint.com.

China Green Agriculture Inc. (NYSE:CGA) engages in the research, development, production, distribution and sale of various types of fertilizers and agricultural products.

  • Cash & Cash Equivalents (100%): $103 Million
  • Accounts Receivables (75%): $108 Million
  • Inventories (50%): $43.5 Million
  • Total Liabilities: $48 Million
  • Total Shares: 37 Million
  • NNWC: $5.62
  • Current Price: $1.28 (closing price on Nov. 8)
  • Price/NNWC: 23%

Emerson Radio Corp. (MSN) designs, sources, imports, markets and sells various houseware and consumer electronic products in the United States and internationally.

  • Cash & Cash Equivalents (100%): $53 Million
  • Accounts Receivables (75%): $1 Million
  • Inventories (50%): $2 Million
  • Total Liabilities: $4 Million
  • Total Shares: 27 Million
  • NNWC: $1.91
  • Current Price: 96 cents (closing price on Nov. 8)
  • Price/NNWC: 50%

Richardson Electronics Ltd. (NASDAQ:RELL)is a provider of electron devices, customized display solutions and health care equipment businesses in North America, the Asia Pacific, Europe and Latin America.

  • Cash & Cash Equivalents (100%): $64 Million
  • Accounts Receivables (75%): $16.5 Million
  • Inventories (50%): $22.5 Million
  • Total Liabilities: $22 Million
  • Total Shares: 11 Million
  • NNWC: $7.53
  • Current Price: $6.04 (closing price on Nov. 8)
  • Price/NNWC: 80%

Support.com Inc. (NASDAQ:SPRT)provides cloud-based software and services in North America.

  • Cash & Cash Equivalents (100%): $54 Million
  • Accounts Receivables (75%): $7.5 Million
  • Inventories (50%): $0 Million
  • Total Liabilities: $11 Million
  • Total Shares: 55 Million
  • NNWC: 96 cents
  • Current Price: 78 cents (closing price on Nov. 8)
  • Price/NNWC: 81%

Nuvectra Corp. (NASDAQ:NVTR) is a medical device company that develops and commercializes its neurostimulation technology for the treatment of various disorders in neuroscience and clinical markets in Europe.

  • Cash & Cash Equivalents (100%): $84 Million
  • Accounts Receivables (75%): $1.5 Million
  • Inventories (50%): $0 Million
  • Total Liabilities: $23 Million
  • Total Shares: 10 Million
  • NNWC: $6.01
  • Current Price: $4.98 (closing price on Nov. 8)
  • Price/NNWC: 83%

Implementation

As with the NCAV strategy, the NNWC approach requires a diverse group of stocks bought at steep margins of safety. This can be put into practice by regularly investing equal amounts in the qualifying stocks with the lowest prices in relation to net-net working capital.

Due to the nature of deep value strategies such as the NNWC, average investors will find numerous reasons not to buy the above stocks. Disciplined investors, on the other hand, will find success following such a simple investment strategy.

You can build your own portfolio using the stock screens on TheStockMarketBlueprint.com.

Check out our Shadow Stock Portfolios to see real-world examples on how to implement systematic investment strategies.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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Rating: 5.0/5 (2 votes)

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Comments

OGCAMG
OGCAMG premium member - 2 years ago

How important is it that the stocks have revenues of a certain level for the year? In the net net screener there are several results for stocks that have negative cash flow per operating share?

Thanks

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