Re: "historical discounts" for net nets
This just does not seem to be relevant. These are
not CEFs. A few observations:
1) We are in no way imitating Graham by buying one
or two net nets at the top of a bull market. 3 profitable
net nets found in the last 2 years of looking doesn't
leave much room for diversifying among a basket of them.
And the bull pretty much rules out any great businesses
being among them.
2) Hence, those of us buying the JBM's and HYDEA's and
PSO's are not following Graham, but a separate unproven
theory that they will eventually reach net net value.
Why am I buying PSO? Because JBM and HYDEA both would
have worked out very well. To Graham's criteria, I add:
improving balance sheet, a trigger or other new developments,
and positive cash flow. This is empirical testing IMO.
So far it's working, but I wouldn't say I'd have Graham's
backing here.
3) Do we know that historical discounts for net nets
are predictive at all? Would it have predicted HYDEA's
or JBM's price movements? Not that I can see, but
I don't know and I doubt it's been studied.
4) That said, hey, we're all trying to find value in
this market, and sometimes its good to just follow
rules. Buy a couple profitable net nets at the
top of a bull and wait for a 50% gain
or 2 years, whichever comes first. This is a theory
in testing right now, and we'll never have the numbers
to generate generalizability or validity to any
conclusions we make.
Mike |
