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It's hard to believe that our index of net/nets is nearly one year old. When we introduced the index in February of 2008, we did so as an experiment. What was designed as a naively constructed cap-weighted index, CS21 has had an interesting ride.

Since inception (February 12th 2008) the CS21 Net Net Index is down 25.3%, versus -35% for the Russell Microcap Index, the closest benchmark that we can find.

While we are somewhat pleased with the results, they are inconclusive at this point. Due to the extreme volatility and market performance during 2008, it was not the best time to make judgment. We'll continue to monitor this index through 2009.

Only 3 stocks in the index have performed positively since inception:

Adaptec (OTC:ADPT-OLD)
Weight: 18.7%
Performance: +19.29%

The Finish Line, Inc (NASDAQ:FINL)
Weight: 7.57%
Performance: +119.58%

Anadys Pharmaceuticals (NASDAQ:ANDS)
Weight: 2.53%
Performance: +134.38%

All other members were in negative territory, some more than 80%, including Leadis Technology (OTCPK:LDIS) (-82%), Handleman (HDLM) (-88%), Chromcraft Revington (CRC) (-92%) and Charles and Colvard (NASDAQ:CTHR) (-83%). That's par for the course in net/net land, in fact bankruptcies are to be expected. While no index members have yet declared bankruptcy, Handelman is in liquidation. One member, Renovis, was bought out earlier in the year. Rather than replace Renovis, we opted to keep that allocation (originally 3.8%) in cash.

We are in the process of designing a new net/net index, and with the choices of available net/nets much more compelling than when we designed CS21, we look forward to unveiling it.

For more on the Cheap Stocks 21 Net Net Index, including constituents and weights, please search this site.

Disclosure: The author does not have positions in any of the companies mentioned.

Source: 21 Net Net Index Update