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Strategies & Market Trends : Value Investing
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To: Q. who wrote (11879)1/17/2001 12:52:29 AM
From: Paul Senior  Read Replies (1) of 79013
 
N, I've been trying to find that 2/3 figure for net-nets in Intelligent Investor, and I don't see it. I know at some point that's what Dr. Graham recommended, but I just do not see it in my edition of the book. Do you or anyone else have the citation?

I see under Portfolio Policy: The Positive Side, "the enterprising investor is to buy them (aside: I believe "them" refers to his definition of secondary - as opposed to primary - common stocks, also ordinary preferred dividends, and foreign bonds) only when obtainable at bargain prices - which we define as prices not more than two-thirds of the appraisal value of the securities." I don't see a 2/3 figure anywhere else.

In the section on "Bargain Issues, or Net-Current-Asset Stocks" he provides (Table 15-2) 5 stocks selling below net current assets (my '73 edition which features stocks in 1970) of "prominent" companies. Only one of the 5 is at 2/3 of net current assets. Perhaps the table is to illustrate that even "prominent" companies are sometimes below net current assets. Interesting to me that the "prominent" feature is what people here might deem important when they select net nets. (include myself)

There's no mention of 2/3 for the buy criterion. "...If one can acquire a diversified group of common stocks at a price less than the applicable net current assets alone-- the results should be quite satisfactory." I give up here. Maybe it's buried in the word "applicable". Maybe the book can only provide a starting point for the defensive and enterprising investor. It's left to the enterprising investor to dig further. Or of course, maybe the 2/3 criterion is there, but I just missed it.

Paul S.
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