But have you persuaded me that historical
discount to net net means anything? No.
On a practical level, should it mean anything?
We're talking about illiquid profitable
stocks that are net nets for lack of
publicity, high insider holdings/low float,
crappy industry, poor management rep, or just plain ignorance
on the Street. Obviously, Wall Street can
be pretty sudden about its decisions when
it does recognize one - both JBM and
Hyde have had 40% moves over a few days.
If ignorance is the issue, then why
should historical discount mean anything?
I think historical discount makes sense if
you feel the market is efficient in the
stock. I obviously don't feel that way
about any of the net nets I've proposed.
Hyde had a historical discount for just
about ever - Al Frank pointed this out
in 1987. My rule involves buying net nets
at a discount in this kind of market,
and waiting 2 years or for 50%, whichever
comes first. I added some other criteria,
and now I'll see how my particular version
of Graham's classic cheap stock screen does.
So far, it's working, but that's not to
say it will or won't continue.
With any net net, I expect poor earnings
comparisons. I expected them when I brought
up Hyde here, and I expected them when
I brought up JBM on MSN. Nothing in my
conversation with JBM's CFO indicated
earnings would improve, but that was
irrelevant to my focus - were the
assets good, and were the inventories
moveable. In this market,
as James says, if a net net doesn't
look like it sucks, then look deeper.
Mike |
