It always seemed, and still seems, ridiculously simple to say that if one can acquire a diversified group of common stocks at a price less than the applicable net current assets alone—after deducting all prior claims, and counting as zero the fixed and other assets—the results should be quite satisfactory.Benjamin Graham, The Intelligent Investor
Nothing But Net-Nets is a website devoted to compounding our capital by investing in stocks trading below their net-current-asset-value.
Studies have continued to validate the return potential of this group of stocks, and yet it is largely ignored by the vast majority of investors. What’s the reason for this inefficiency? There are several:
- The stocks are rarely found in the United States
- The businesses and financials can often be toxic
- The businesses are far from household names
- The stocks can be illiquid
- The returns are volatile and lumpy
- You can’t put too much capital in them!
If you are in the 99% of people with less than $10 million of net worth, you can probably invest in Net-Nets.
Our approach to Net-Nets is fairly standard. We use Ben Graham’s approach that he discussed in The Intelligent Investor. We will typically look at anything trading below net-current-asset-value.
However, we won’t be 100% sticklers if we find value that doesn’t conform to GAAP accounting conventions. We will highlight wherever we differ from the rules.
We also may discuss and invest in stocks that are outside of the the traditional rules of net-nets, but are trading at low enough valuations to warrant consideration (a more accurate name for our site is Mostly Net-Nets).
We will be investing our own money in these stocks, and will be disclosing the returns of our real-money portfolio.