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Net Net Investing Series 1 Of 3

Summary

Investing in cheap stocks can help you crush the market

Quantitative screening can improve results further

Net nets should be invested in selectively due to their super high volatility

I'm going to put together a short series of blog posts regarding net net stocks. In the first post, I'll define "net nets" and provide a group of links to some of the best articles and books to learn about this tried and true method.  There is a ton of info out there, so I'm just going to make it easy to find in one spot. In the second and third posts, I'll show how to improve on the basic net net strategy and finally when I believe it's best to use it.  Enjoy!  

Net Nets are stocks trading for a lower valuation than current assets - all liabilities.  The proper definition is below from Investopedia . 

Net-Net

A backtest showing net net stocks versus investing in the S&P 500 is shown below.  Graph is from Portfolio123.  

If we only hold stocks which trade at less than 2/3 of NCAV as shown below, performance improves further. 

Here are the links to some of the best articles and books out there on net net investing.   

Articles

Deep Value Investing and Unexplained Returns by Jeffrey Oxman, Sunil Mohanty, Tobias Eric Carlisle :: SSRN <-- Oxman, Mohanty, Carlisle white paper

Portfolio strategies: The definitive guide to net-nets <-- Oddball Stocks

Ben Graham Net Net Stocks and a 7 Step Checklist to Make Money with Net Nets <-- Old school value

Evan Bleker's Articles <-- Evan Blecker SA Blog

Joel Greenblatt's Forgotten Original Magic Formula - Net Net Hunter <-- Joel Greenback Net Net

Net-nets <-- Swedish Net Nets

Montier on net nets: A simple quantitative value strategy <-- Greenbacked blog Japan

Books

Deep Value Investing: Finding bargain shares with big potential <-- Bos Net Net Book

http://amzn.to/2wlBn9O <-- Wendl Net Net Book