Tuesday, January 11, 2011

Where Are All The Net/Nets? Ben Graham asked the Same Question in 1968

At this writing, we've never seen so few net/nets at any point in the decade plus that we've been studying and researching them. In fact, we currently count a total of 12 with market caps in excess of $50 million. Unfortunately (or fortunately, depending on your perspective) a rising market tide tends to lift all boats, including net/nets. We've also seen a growing population of websites covering net/nets since we started this site in 2002, which may also partially explain the lack of opportunity; there are simply more investors that have caught on to this fascinating sub-culture.

Periods of low net/net opportunity are not uncommon; even Ben Graham wriote about one such period that occurred in 1968 in the 1973 edition of Intelligent Investor. Ben wrote:
But the picture changed in the 1970 decline, and at the low prices of that year a goodly number of common stocks could have been bought at below their working capital value.

In our experience, it's more than likely that the univerese of net/nets will only grow if there is a significant market pullback. I'm not wishing that on anyone, but will continue to look for opportunity in the current crop of net/nets. Having some dry powder available is not a bad idea.

Top 5 Net/Nets by Market Cap

Imation Corp
Ticker: IMN
Price: $10.59
Market Cap:$408
NCAV: $412
Mkt Cap/NCAV: .99
Cash & ST Invest: $256.8

Ticker: ADPT
Price: $2.88
Market Cap: $317
NCAV: $368.6
Mkt Cap/NCAV:.86
Cash & ST Invest: $365.8

Volt Information Sciences
Ticker: VOL
Price: $8.92
Market Cap: $186
NCAV: $199
Mkt Cap/NCAV: .93
Cash & ST Invest: $145.6
P/E: 4

Ticker: VOXX
Price: $7.91
Market Cap: $184
NCAV: $212
Mkt Cap/NCAV:.87
Cash & ST Invest: $73.1
P/E: 9

Ticker: MAXY
Price: $4.04
Market Cap: $121
NCAV: $142.5
NCAV/Mkt Cap: .85
Cash & ST Invest: $152.4

The author has no position in the companies mentioned. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.

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