40 Net Current Asset Stocks for Value Investors

Ben Graham, the father of Value Investing and teacher of Warren Buffett, was also a successful investor in 20th century. The four bread and butter strategies, employed by his firm, the Graham-Newman corporation between 1926 and 1956 included arbitrages, related hedges, liquidations and Net-Current-Asset or Bargain issues. Today I will provide a brief overview of the Bargain Issues strategy and provide some current stock picks.

The main goal with the bargain issues was to purchase shares in companies for less than two thirds of their asset values at prices that a private owner might pay at an acquisition. The fact that investors paid less than two thirds of the net working capital for the bargain stocks provided a margin of safety to those shareholders. Furthermore Graham-Newman strived to maintain a diversified portfolio of these Net Current Asset stocks, sometimes holding as much as one hundred of those issues which were worth considerably more than what they are selling for. Experience had taught Graham that few stocks are ultimately worth less than their net current assets minus the total liabilities.
Using this screen from GrahamInvestor.com site I came out with the following list of 40 bargain stocks:


It’s interesting to note that there are two builders – Beazer Homes and Standard Pacific. It’s definitely suspect whether their inventories could be sold at the levels that they keep on their books. The rest of the issues include stocks with low trading volumes. Furthermore most of the stocks on the list are losing money. It would be interesting to see how these enterprises perform over the next two years.

Comments

[mrxg4:]

No disclosure? Did you end up buying any of these?

2008 Nov 29 02:41 PM

[crofin:]

You can also add Aquiline (AQI on Toronto) on the list. why ? here:crofin.canalblog.com/a... (use a google translator)

and aslo a lot of mineral companies !

shopping centers are wide open and nobody's cares
enjoy

2008 Nov 30 07:33 AM

[granger:]

Thank you for the ideas. I will comb through and maybe develop a basket of 5-7 good ones, good be a good portfolio diversifier.

2008 Nov 30 11:36 AM

[Dividend Gr...:]

MRXG4,

I don't own any of the above stocks. I have been researching TAIT in order to determine how much can you get out of it if the inventory were sold off. I also like that TAIT seems to be returning capital to shareholders through dividends over the past 2 years.

Of course the builders also look interesting as a potential value play. Graham made a lot of money in the 1930's by buying whole companies selling below the net current assets minus total liabilities and then liquidating them..

2008 Nov 30 04:55 PM

[BudH:]

Some of these companies have significant liabilities that see unaccounted for in your list. FBN is the one I have in mind.

2008 Nov 30 09:10 PM