In this edition of Watchlist Wednesday, we highlight five stocks trading below their net current asset values (NCAV).
Investment managers and financial media pundits often say Benjamin Graham’s famous Net Current Asset Stocks no longer exist. They claim the strategy can’t be implemented anymore because the stocks are too hard to find.
The Stock Market Blueprint’s NCAV stock screen currently shows a dozen U.S. listed stocks selling below their NCAV. Several more are trading just slightly above this metric.
Considering that Graham suggested investing in baskets of 10-30 NCAV stocks, there appear to be more than enough opportunities for individual investors.
This article appeared first on The Stock Market Blueprint Blog
NCAV is a stock-selection strategy developed and implemented by Benjamin Graham as discussed in Security Analysis (1) and The Intelligent Investor (2).
Warren Buffett nicknamed it the “cigar-butt approach” because “a cigar-butt found on the street that has only one puff left in it may not offer much of a smoke, but the ‘bargain purchase’ will make that puff all profit.”
The screen finds stocks trading for less than the difference between current assets minus total liabilities. There is no regard given to the company’s long-term assets or future profits.
Here is a breakdown of the five stocks with the lowest price to NCAV as found on The Stock Market Blueprint’s NCAV stock screen.
- Current Assets: $336 Million
- Total Liabilities: $48 Million
- Total Shares: 37 Million
- Net Current Asset Value: $7.83
- Current Price: $1.31 (closing price on 11/1/16)
- Price/NCAV: 17%
- Current Assets: $175 Million
- Total Liabilities: $84 Million
- Total Shares: 38 Million
- Net Current Asset Value: $2.39
- Current Price: $0.68 (closing price on 11/1/16)
- Price/NCAV: 28%
Sears Hometown and Outlet Stores Inc. (NASDAQ:SHOS) engages in the retail sale of home appliances, lawn and garden equipment, tools, and hardware in the United States.
- Current Assets: $482 Million
- Total Liabilities: $213 Million
- Total Shares: 23 Million
- Net Current Asset Value: $11.82
- Current Price: $4.90 (closing price on 11/1/16)
- Price/NCAV: 41%
Emerson Radio Corp (NYSEMKT:MSN) designs, sources, imports, markets, and sells various houseware and consumer electronic products around the world.
- Current Assets: $60 Million
- Total Liabilities: $4 Million
- Total Shares: 27 Million
- Net Current Asset Value: $2.05
- Current Price: $0.97 (closing price on 11/1/16)
- Price/NCAV: 47%
Richardson Electronics, Ltd. (NASDAQ:RELL) engages in microwave technologies, display, and healthcare equipment businesses.
- Current Assets: $132 Million
- Total Liabilities: $22 Million
- Total Shares: 11 Million
- Net Current Asset Value: $10.31
- Current Price: $6.29 (closing price on 11/1/16)
- Price/NCAV: 61%
Late in his life, Benjamin Graham estimated that the Net Current Asset Value strategy earned him an average of 20% per year over 30 years.
Due to the nature of deep value strategies such as the Net Current Asset Value, average investors will find numerous reasons not to buy the above stock.
Disciplined investors, on the other hand, will find success following such a simple investment strategy.
You can build your own portfolio using the stock screens on TheStockMarketBlueprint.com.
Check out our Shadow Stock Portfolios to see real-world examples of implementing systematic investment strategies.
Note: Mitchell Mauer is the Founder of TheStockMarketBlueprint.com. The Stock Market Blueprint is a site that finds value stocks for investors building long-term wealth. The site’s investment philosophy is anchored in principles established by Benjamin Graham and his most reputable followers over the last 100 years.