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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: TimbaBear who wrote (11891)	1/17/2001 6:16:41 PM
From: rjm2	Read Replies (1) \| Respond to of 78627

The thing to remember with Net current assets is that the inventory (as well as other things) is often worth considerably less in a liquidation. So when you buy net-nets, like I did with DIYH, and they close stores, inventory only brings in the 65% range. I think in Grahams day, he was buying old line companies for 2/3 NCA that were often also selling at low p/e's and such. Today, we get stocks where there are serious concerns over the assets. Take FRDM for example. The market questions their entire business model and especially their recievables.

To: TimbaBear who wrote (11891)	1/17/2001 7:08:47 PM
From: Paul Senior	Read Replies (1) \| Respond to of 78627

Ahhh! 2/3! Thank's TimbaBear. I have the 4th edition also. The words are right there in front of me and I missed it completely. I even had the page (205) penciled in in the index ---I had written in my index that "net current assets" were mentioned on pages 184,205,and 214-215. (As you know, there's no listing in the index for "net current assets" -- one has to look under "bargain issues".) I don't mean sound like I'm discussing the number of angels that can fit on a pin - it's just that I like to have some academic or some empirical support for the types of investments I make. I like and use the criterion of 2/3. I make an attempt to hold my nose and close my eyes when I pick up net-nets that sell for 2/3 net current assets. Those stocks would be cigar butts that smell and look like cigar butts and which have nothing that makes them attractive. I try to pick up as many as I can (diversify) as Dr. Graham implies. Sometimes though, I peek at what I am about to pick up, and it looks so unattractive - I walk away. (That's my problem -- I've no evidence that those avoided stocks don't work out okay.) I'll also buy stocks selling at net current assets if I can see something attractive about them - SCNYB for example, which will have earnings, an okay price/sales and a very low p/e. The best net-nets are those that others buy here or mention that they are buying as a net-net on the respective Yahoo thread (Aside: you may see RJM's monikers show up.) "Best" in the sense that it gives me some comfort/encouragement that I'm not a total lone fool for buying such a stock. I've only kept an informal record the past few years of the net-net performance I've had. All such issues (2/3 of NCA)have worked out profitably. But some are "sort of" profitable in that yes, I've sold these at higher prices than I paid for, but I had to hold them 2-3 years to do it, so the ROI there might be poor. I've no idea the overall profitability I've experienced. I suspect it's not as good as Messieurs Clarke and Burry (who screen net-nets further) or RJM (who seems to specialize in this aspect of investing). Paul S.