Watchlist Wednesday: Net-Net Working Capital

| About: China Green (CGA)
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In this edition of Watchlist Wednesday, we highlight five of the top stocks qualifying for the Net-Net Working Capital (NNWC) screen.

NNWC is similar to the NCAV screen except it is more stringent. Graham knew that companies undergoing liquidation would not necessarily sell all current assets at book value. In order to add a level of safety, he felt it beneficial to discount the accounts receivables and inventories when calculating current assets.

Description

Like NCAV, NNWC finds stocks trading for less than the difference between current assets minus total liabilities, and no regard is given to the company's long-term assets or future profits.

But where NCAV accounts for 100% of a company's current assets, NNWC builds a larger margin of safety by discounting both receivables and inventory. To calculate the NNWC of a stock, the screen values a firm's current assets at the following levels:

  • Cash & Cash Equivalents: 100%
  • Accounts Receivables: 75%
  • Inventories: 50%
  • Long-Term Assets: 0%

Here is a breakdown of five stocks with low price to NNWC as found on thestockmarketblueprint.com:

China Green Agriculture, Inc. (NYSE:CGA) - China Green Agriculture, Inc., through its subsidiaries, engages in the research, development, production, distribution, and sale of various types of fertilizers and agricultural products. The company markets its fertilizer products to private wholesalers and retailers of agricultural farm products in 27 provinces, four autonomous regions, and three central government-controlled municipalities in China. It also develops, produces, and sells flowers, green vegetables, fruits, and colored seedlings, which it sells to flower shops, luxury hotels, government agencies, supermarkets and upscale restaurants. China Green Agriculture, Inc. also exports its products through contracted distributors to India and Ghana. The company is based in Xi'an, the People's Republic of China.

  • Cash & Cash Equivalents (100%): $99.57 Million
  • Accounts Receivables (75%): $84.91 Million
  • Inventories (50%): $59.16 Million
  • Total Liabilities: $64.37 Million
  • Total Shares: 36.93 Million
  • Net-Net Working Capital/Share: $4.85
  • Current Price: $1.40 (closing price on 4/12/16)
  • Price/NNWC: 28.9%

SORL Auto Parts, Inc. (NASDAQ:SORL) - SORL Auto Parts, Inc. develops, manufactures, and distributes automotive brake systems and other safety related auto parts. It operates in two segments, Commercial Vehicle Brake Systems and Passenger Vehicle Brake Systems. Its products are principally used in various types of commercial vehicles, such as trucks and buses. SORL Auto Parts, Inc. markets its products under the SORL brand to automotive original equipment manufacturers and the related aftermarket. The company was founded in 2003 and is based in Rui'an, the People's Republic of China.

  • Cash & Cash Equivalents (100%): $91.24 Million
  • Accounts Receivables (75%): $53.87 Million
  • Inventories (50%): $36.83 Million
  • Total Liabilities: $$120.39 Million
  • Total Shares: 19.30 Million
  • Net-Net Working Capital/Share: $4.12
  • Current Price: $1.68 (closing price on 4/12/16)
  • Price/NNWC: 40.8%%

Emerson Radio Corp. (NYSEMKT:MSN) - Emerson Radio Corp., together with its subsidiaries, designs, sources, imports, markets, and sells various houseware and consumer electronic products in the United States and internationally. It provides houseware products, audio products, and miscellaneous electronic and novelty products. The company offers its products primarily under the Emerson brand name, and licenses its trademarks to others on a worldwide basis for various products. Emerson Radio Corp. markets its products primarily through mass merchandisers. The company was founded in 1948 and is headquartered in Hackensack, New Jersey. Emerson Radio Corp. operates as a subsidiary of S&T International Distribution Ltd.

  • Cash & Cash Equivalents (100%): $48.23 Million
  • Accounts Receivables (75%): $2.28 Million
  • Inventories (50%): $2.34 Million
  • Total Liabilities: $3.22 Million
  • Total Shares: 27.13 Million'
  • Net-Net Working Capital/Share: $1.86
  • Current Price: $0.85 (closing price on 4/12/16)
  • Price/NNWC: 45.7%

Support.com, Inc. (NASDAQ:SPRT) - Support.com, Inc. provides cloud-based software and services primarily in North America. It provides automation and analytics, technology support services, including computer and mobile device set-up, security and support, virus and malware removal, wireless network set-up, and home security and automation system support services to the consumer, and small and medium business markets. In addition, it offers software products to maintain, optimize, and secure computers and mobile devices. Support.com, Inc. was founded in 1997 and is headquartered in Redwood City, California.

  • Cash & Cash Equivalents (100%): $65.73 Million
  • Accounts Receivables (75%): $7.51 Million
  • Inventories (50%): $0 Million
  • Total Liabilities: $10.15 Million
  • Total Shares: 54.86 Million
  • Net-Net Working Capital/Share: $1.16
  • Current Price: $0.87 (closing price on 4/12/16)
  • Price/NNWC: 75%

WaferGen Bio-Systems, Inc. (NASDAQ:WGBS) - WaferGen Bio-Systems, Inc. develops, manufactures, and sells systems for gene expression quantification, genotyping, and stem cell research for the life sciences and pharmaceutical drug discovery industries in the United States, Canada, Europe, and the Asia Pacific. The company focuses on providing its products to researchers who perform genetic analysis and cell biology, primarily at pharmaceutical and biotech companies, academic and private research centers, and diagnostics companies involved in biomarker discovery and genetic research. WaferGen Bio-Systems, Inc. was founded in 2002 and is headquartered in Fremont, California.

  • Cash & Cash Equivalents (100%): $15.24 Million
  • Accounts Receivables (75%): $1.65 Million
  • Inventories (50%): $1.00 Million
  • Total Liabilities: $7.18 Million
  • Total Shares: 14.08 Million
  • Net-Net Working Capital/Share: $0.77
  • Current Price: $0.58 (closing price on 4/12/16)
  • Price/NNWC: 75.3%

As with the NCAV strategy, the NNWC approach requires a diverse group of stocks bought at steep margins of safety. This can be put into practice by regularly investing equal amounts in the qualifying stocks with the lowest prices in relation to net-net working capital.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.