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Author: StevnFool Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 441  
Subject: Re: Chapter 15 Date: 10/1/2004 12:46 PM
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Thank you for your kind response. But doresn't"Total Current Assets - Total Current Liabilities - all other obligation prior to the common shares." leasve out long term assets like good will which is one of warren's favorites?

On the other hand you are basically looking for a company that has 30% more cash than all debt.

In today's timeframe such disparities are discovered VERY quickly and we not in Ben's time.

But I have bookmarked the MI board.

I just don't believe you can find that sort of thing in the real world. It is like the no money down real estate lectures, sure if you can find someone dumb enough to give away their property, you will make a mint.


I know Warren like Goodwill, but Graham didn't. It is one of the few areas in which they differed. Graham didn't say that this was the only way to value stocks, but it was one way that he found to be profitable. He mentions that he found plenty of these towards the end of the 1960's, but in the early 1970's, he said that they had pretty much dried up. The same thing has happened now. There were plenty of them available in early 2003, but I think they have mostly dried up now.

Here is a list generated last Friday close and posted on the MI board by Fireballs.

HETC
TRNT
IBPI
WNMLA
INFO
PLCC
TAIT
ERGO
ACRTQ
LENS
FRDM

These use a slightly simplified calculation of NET-NET value per share which is:

(Total Current Assets - Total Current Liabilities - Long Term Debt)/ Shares Outstanding

The list represents all those trading at less than 2/3rd NET-NET value at a price > $1 as of last Friday close.

You may want to do some due dilligence before buying any of these. I am finding lately that there is something wrong with a lot of them such as:

1. They may have issued a large cash dividend since the last statement.
2. They may be involved in an aquisition that could have an unknown effect on the balance sheet.
3. They may be rapidly losing NET-NET value quarter over quarter.
4. Most of the Current Assets may be Inventory.

I would recommend that you take a close look at the stocks on this list.

I still firmly believe that at times this still represents an excellent way to pick stocks. It worked in Graham's day. It worked in recent years and I believe it will continue to work. You have to remember that if everyone is chasing the latest growth stock, this type of stock goes seriously out of fashion. Graham did recommend that you hold a diversified list of these (approx 20).

StevnFool
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