Screening For Ben Graham Net-Net Bargains

Gurufocus.com is a site dedicated to delving into professional money managers’ every real-time portfolio move. I know that my 13-F posts are among the most popular for my blog so readers may find the services at gurufocus.com useful as well.  I took the opportunity to run one of their premium screens, the Benjamin Graham Net Current Asset Value Screener.

This screen mimics Graham’s famous “net-net” bargains. According to gurufocus.com:

Ben Graham loved these types of situations, defining the net-net value as:
Cash and short-term investments + (0.75 * accounts receivable) + (0.5 * inventory) – total liabilities

The specific criteria used were as follows:

  • The stock prices are less than the net current asset value of the companies.
  • During the past 12 months, the companies generated postive operating cashflow.
  • The company has no meaningful debt compared to its cash position.

The screen turned up 39 candidates but for brevity’s sake, I used a $100M minimum market capitalization to narrow the list to 9 stocks, presented below in spreadsheet format with basic company information, debt/EBITDA and free cash flow metrics.

View the Benjamin Graham Net Current Asset Value Screener spreadsheet


The first thing to note is that Graham recommended holding a large, diversified set of these bargains since many of them risk going out of business. A quick look at the spreadsheet reveals the wisdom behind his thinking. Only 2 of the 9 stocks, Adaptec (ADPT) and Nam Tai Electronics (NTE – discussed extensively on the blog) had positive, albeit unattractive PEG ratios (4.1 and 6.8, respectively). Over half the companies generated negative to marginal EBITDA in the last year.  The only two companies to pay dividends were Nam Tai and K-Swiss (KSWS); NTE’s dividend is currently suspended.

If one was inclined to go against the master’s advice and try to pick winners, focusing on positive free cash flow over the last twelve months and good operating results over the past 5-6 years may be a place to start. On this basis, KSWS and Syneron Medical (ELOS) stand out. But both of these companies lag their industry on returns on investment and equity (ROI/ROE). From that standpoint, NTE and Actions Semiconductor (ACTS) were the only two companies that outperformed their industries.

In-depth research is definitely a requirement to find the companies positioned to recover or poised to return value to shareholders in the worst-case scenarios.

Full disclosure: I am a content contributor to gurufocus.com but receive no monetary contribution for my writing or for mentioning or directing readers their site. I find their site and services useful and if nothing else, appreciate the benefit of using a pre-defined screen for this week as opposed to dreaming up a new screen. As always, YMMV.

View the Benjamin Graham Net Current Asset Value Screener spreadsheet

4 Responses to “Screening For Ben Graham Net-Net Bargains”

  1. Jae Jun Says:

    I’ve got pretty much the same post scheduled for tomorrow although I’ve created a spreadsheet to automatically pull data and calculate the NNWC value for investors.

  2. Anthony Says:

    KSWS paid out a $2 per share dividend in January. The cash balance is $70M less than the balance as of Dec 31 because of the dividend.

  3. Davy Bui Says:

    Sorry to steal your thunder, Jae! You have a spreadsheet that calculates NNWC for all stocks?!?

    Anthony, thanks for the KSWS update. The numbers are pulled from the MRQ as stated on Reuters, Yahoo, etc., assumed to be the quarter ended Dec 31 but that can not be guaranteed. Also, my survey is a 10,000 foot overview so any color from someone following the stock “on the ground” is much appreciated.

  4. Jae Jun Says:

    Its just a real simple template but as long as the stock information is posted on ADVFN.com it will work. Google and yahoo numbers are oversimplified so I decided not to use those.

    Simply grabs the cash values, inventory, and other details from the quarterly statements.

    My server was down the whole day today so I’ll have to post it late tonight or something..

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