Net Net Portfolio

[Nebula]

sorry what are net net stocks?

Hi LLS,

net net stocks are stocks that are selling for 2/3 of liquidation value.

that is, current assets less all liabilities. theoretically, a stock should not be sold for less than its liquidation value, it low price suggest that this company is worth more dead than alive.

this net nets are usually unloved stocks for some reason or other, for s- chips, i think it is due to fear accounting irregularities and fraud and management that are not doing things in the interest of its shareholders that depress the prices.

a catalyst is usually needed to prop up the share price, such as increased earnings, resuming dividends, being bought over, etc.

Ben Graham says that a basket of these types of stocks make a safe and good investment.

this is an alternative to the buffett type "wonderful company at a fair price" which might be hard to pick as it is based on qualitative factors, IMHO.

net net are risky by themselves, but as a diversified list should be a good investment.

however, i have not had the opportunity to hear from other investors if this is really true for our market.

open to any advice or stories any of you might have regarding really ugly net nets.