Tuesday, December 26, 2006

It's Not Easy Being Net(Net)

This website was originally built and dedicated to identifying potentially profitable ideas among the ranks of companies trading below their net current asset value. In the ensuing years, we’ve expanded into other areas—anywhere we find value, be it real estate, companies going private, etc: Which is a good thing, given the fact that the net/net world has become very stale, and somewhat boring. You’ll no doubt see what we mean later in this piece when we reveal the list of the top 10 net/nets in terms of market cap: you’ve probably seen them all before.

The reason we are not finding many interesting net/nets these days is related to the strength in the markets. In terms of net/nets, a rising tide (the markets) does lift all boats: including those with holes. Net/nets are few and far between as compared to when we started looking at them five or so years ago. We counted as many as 500 in 2002-2003, now there are less than 100, and many are so tiny that they don’t bear mention.

Don’t worry though, there’s other value out there, and we’ll continue to offer our opinions and insights (as convoluted as they may often seem). Don’t be fooled though, there will be another time when the net/net list grows, when the markets suffer from a downtrend. Meanwhile, we’ll enjoy this bull-run we are currently experiencing, maybe a bit skeptically. And we’ll still churn out research on the oft chance we identify an interesting and compelling net/net. We actually identified one the other day, and took a position, but the company is so small and trades so infrequently that we are hesitant to reveal it, for fear of being branded a pumper and dumper. That is not what we are about.

Below is a list of the top 10 companies trading below net current asset value in order of market cap:
InFocus Corp(INFS)
Lazare Kaplan Intl(LKI)
Orthologic Corp(OLGC)
Overland Storage(OVRL)
Kaiser Group Holdings(KGHI)
CallWave Inc(CALL)
Inhibitex Inc(INHX)
Selectica Inc(SLTC)
Remec Inc(REMC)

Here are the top 10 double net/nets-companies trading at less than twice NCAV:
Ingram Micro(IM)
Tech Data Corp(TECD)
Celera Group(CRA)
Sycamore Networks(SCMR)
Leapfrog Enterprises(LF)
Elector Scientific Industries(ESIO)

*The author has positions LKI, and LF. This is neither a recommendation to buy or sell these securities. All information provided believed to be reliable and presented for information purposes only.

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