Back in February of 2008,we launched a rather unique experiment, an index of companies trading below their net current asset value. We laid out our selection criteria and premise in our February 15, 2008 post. Truthfully, this was a rather naive approach to creating an index, a fact we were well aware of.
We did make some adjustments along the way; we did not rebalance annually, nor did we use cash that was the result of acquisitions to replace index constituents. It became a set it and forget it portfolio of companies that were net/nets at the inception date of the index.
Our original intent was to wind down the index at the end of two years, and judge performance against the Russel Microcap Index. As of Friday, the CS21 has outperformed the Russel Microcap Index by 1356 bps. While we'd hoped for better absolute returns than the 6.6% since inception that CS 21 has realized, we consider this first attempt to be mildly successful.
We are busy creating a new index of net/nets, which will be tentatively released in early February. Stay tuned; the new index will have an interesting twist.