Graham Cheap Stocks & Free Net Net Investment Spreadsheet

March 24, 2009 | Comments (16)

Jae Jun

The micro and small cap universe is where the biggest price inefficiencies exist and it is exactly the place to find hidden gems. The good news from the 2008-2009 crash was that mid or large caps fell to the point where it became become small cap stocks.

Net Nets are Cheap Stocks

Net Nets are penny stocks for a reason. Their operations have suffered dramatically or they are facing some serious short term issues that threaten to put them into bankruptcy.

Take GGP for example. Debt laden, unable to refinance and late on its payments has sent it scattering down 99%.Without getting into a debate over whether the equities have value in the face of bankruptcy, GGP could be a profitable net net.

We saw Pier 1 Imports (PIR) up 275% in a day. This is what could happen if you happen to choose correctly and the company takes corrective measures.

Net Net Working Capital Formula

For those new to net nets or need a refresher, I previously wrote about Ben Graham’s definition and calculation of Net Nets.

Net Net Working Capital = Cash and short-term investments + (0.75 * accounts receivable) + (0.5 * inventory) – total liabilities

Finding Cheap Stocks

You can find net nets by starting off with a P/B ratio less than 1 in any screener that I’ve mentioned previously as most net nets will be below book value.

A negative enterprise value screen also provides some interesting if not better results.

What to Look For

Now the real work involves weeding out the bad ones. It’s vital to look for a business that is stable so that operating losses don’t eat away the existing cash and other components of Net Net Working Capital.

If a net net has the following attributes it is definitely worth keeping an eye on.

  • Activist investor or management creating a catalyst
  • Company stock repurchases
  • Insider buying
  • A consumer brand name
  • An easy to understand business

Free Graham Net Net Valuation Spreadsheet

To speed up the research process, I’ve created a spreadsheet that takes data from the last updated quarterly statements on ADVFN.com.

It takes 4 different tickers so you can compare side by side but it can support as many as you desire. Simply copy and paste.
Benjamin Graham Net Net Cheap Stock Valuation Spreadsheet

Four Net Nets to Ponder

Adams Golf (ADGF)

Adams Golf, Inc., incorporated in 1987, designs, assembles, markets and distributes golf clubs for all skill levels.

  • NNWC Price: $3.64
  • Current Price: $2.63
  • Discount to NNWC Price: 27%

Trident Microsystems Inc (TRID)

Trident Microsystems, Inc. (Trident) designs, develops and markets integrated circuits (ICs) and associated software for digital media applications, such as digital television, liquid crystal display (LCD) television and digital set-top boxes (STB).

  • NNWC Price: $2.51
  • Current Price: $1.43
  • Discount to NNWC Price: 41%

Digirad Corporation (DRAD)

Digirad Corporation is a provider of cardiovascular imaging services and solid-state nuclear medicine imaging products to physician offices, hospitals and other medical services.

  • NNWC Price: $1.35
  • Current Price: $1.00
  • Discount to NNWC Price: 26%

Amtech Systems (ASYS)

Amtech Systems, Inc. (Amtech) is a supplier of horizontal diffusion furnace systems used for solar (photovoltaic) cell and semiconductor manufacturing. The Company operates in two business segments: solar and semiconductor equipment, and polishing supplies.

  • NNWC Price: $3.97
  • Current Price: $3.28
  • Discount to NNWC Price: 17%

Other Points

Since this stock valuation calculator is free, if you enjoy this spreadsheet, consider buying the best stock valuation spreadsheet available on the internet.

IMPORTANT!

Please read the installation guide and FAQ.

To date, I’ve been spending hours helping people with simple excel issues on a free product rather than anything spreadsheet related.

So for all excel and install problems, place all questions in the comment sections below. That way I won’t have to answer the same question again and again.

How to Download

The download has now moved.

To download the spreadsheet, you must go to the main page of Old School Value and sign up with your email to receive a list of free spreadsheets.

The list includes nine free spreadsheets, the add-in required to download data from the internet as well as all the installation help material.

Premium Spreadsheets

Feel free to check out the free version and then when ready, go to the stock valuation software page and review what you will get with the premium.

The premium version includes several valuation models as well as fundamental analysis data, historical data, charts and competitor comparison features. Just by entering one ticker, you can immediately get all that information on your favorite stock which will save you hours in your analysis.

Go now and see for yourself why people rave about the spreadsheets.

DCF Excel Spreadsheet Screenshot

Disclosure

I own GGP at the time of writing

  • http://www.oldschoolvalue.com Jae Jun

    Sorry for the lost comments on this post. I had to quickly transfer the database and lost the latest comments in the process.

  • http://www.stockpursuit.com Mark

    how about VVTV!! nice. hope its going good for you

    Mark’s last blog post..Penny Stocks, Everything In Play

  • http://www.stockpursuit.com Mark

    what’s your price target on VVTV?

    Mark’s last blog post..Penny Stocks, Everything In Play

  • http://www.oldschoolvalue.com Jae Jun

    Yeah VVTV has been rallying extremely nicely. I’m just over 100% so far but still feel its still too cheap to unload. My minimum price target is at around $1.5. If fear and uncertainty wasn’t in the stock price, I think it deserves to be around this mark.

  • ludovici

    I’m puzzled by this Net Net discussion. (Sorry if I’m slow.) VVTV I understood — its assets were a few times higher than the total value of all shares outstanding. But with GGP, its debt seems to tower over its assets; so where is the hidden value?

  • http://www.oldschoolvalue.com Jae Jun

    @Ludovici

    Sorry I didn’t elaborate on GGP. It’s becomes a long argument and it’s also toss up as to whether you believe it is a net net or not.

    GGP is a REIT so if you don’t count their property, it isn’t worth considering. But we have to include its real estate. Even at depressed mark down prices, the property is still worth more than its liabilities.

    The argument so far is that commercial real estate prices haven’t come down far enough, which ultimately means that GGP assets should be marked down further. But I don’t think it matters as much because should GGP be forced to liquidate, it would be devastating for the entire economy.

    The company’s operations are doing well and able to pay its interest from operations, but it’s just the huge $3+bil in upfront cash it has to pay out that is the cause of concern.

    I do believe the assets outweigh the debt though. I’ve only mentioned the broad points but I’ll provide some more details if you are interested.

  • ludovici

    Thanks for the response. I won’t ask you to explain it all, because most of the accounting would be beyond me, I think. But let me ask you this: I use the data I find at the Ameritrade site where I trade. Is there a better source for company data free online? It says that total debt is about 25 billion and total assets only about 1.5 billion. Property is an asset; isn’t it? I recognize that most of your readers are much more educated on these things, so I appreciate your patience.

  • http://www.oldschoolvalue.com Jae Jun

    It wasn’t long ago that I found it difficult to understand accounting concepts as well but it gets better as you read more.

    I’ve never used the Ameritrade site but Morningstar, Google Finance, ADVFN.com are places where I get data if I need it quickly.
    But what I really do is I’ve made a bookmark on my browser that links to edgar (http://sec.gov/edgar/searchedgar/companysearch.html).
    From the site you enter the Ticker where it says “or CIK or Ticker Symbol:” and it will list every document the company files to the sec.
    Look for the 10-Q or 10-K which is the quarterly and annual reports and it will always have the accurate information. From the balance sheet you can check for assets and yes, property is an asset.

  • ludovici

    thanks.

  • Jim

    Hey Jae. I can’t get this spreadsheet to work. Congratulations on VVTV by the way :) doing your homework pays off. All the best.

  • Jim

    Woops, never mind. I figured it out. Thanks for the tool Jae.

  • http://www.oldschoolvalue.com Jae Jun

    Jim,
    Can you help by providing some feedback on this. Do I need to add any additional details or fields or do you think it is fine the way it is?

  • Jim

    Jae, I think the spreadsheet is fine the way it is in my opinion. Its very simple and easy to understand. For me, I like simple the best and this spreadsheet you’ve created represents that. I love your spreadsheet work. You’re really really good at that and thanks again. I saw your post on IGOI and my initial thought is that it looks like a diamond in the rough. Keep up the great work.

  • http://www.oldschoolvalue.com Jae Jun

    (Special notice for comment subscribers)

    I’ll be posting an update to the free net net spreadsheet hopefully this week.

    Fixes include:
    * 16 ticker inputs compared to the current 4.
    * correction in the conditional formatting of cells
    * delete “restricted cash” from assets since it should not be counted as assets and will inflate the price

    Also, to improve the performance of load up times, open up excel and turn off the automatic formula recalculating option. That way it wont recalculate every time you enter a ticker. Just enter it once, press F9 to refresh, wait and viola.

  • http://www.agdwed.wordpress.com Graeme

    Crazy! It’s now 2012 and most of these have more than doubled. Net-nets + long horizon = results.

  • http://www.oldschoolvalue.com Jae Jun

    I was surprised to see it myself. This is all hindsight, but if I had emptied my piggy bank and put some of it into stocks, I’d have some funds available to put to good use lol

x
Receive Email Tips and Strategies on Achieving Higher Stock Returns

Bonus: FREE Set of 9 Investing Spreadsheets