This strategy is one of Ben Graham's most famous bargain stock strategies aiming to find stocks trading for less than their liquidation value. The idea is to find stocks trading at such a cheap price that you could buy the whole company and sell off all the assets at a profit with near minimal risk. It is a simplistic screen which just looks for stocks where the market cap is less than the so called 'Net Net Working Capital' (defined as Cash and short-term investments + (75% of accounts receivable) + (50% of inventory) - All Liabilities). The formula is very conservative in estimating the value of inventory and receivables due to the likelihood that not all will be collectible in a firesale.
About such stocks Graham wrote: ‘ No proprietor or majority holder would think of selling what he owned at so ridiculously low a figure…In various ways practically all these bargain issues turned out to be profitable and the average annual result proved much more remunerative than most other investments’.
This is not a strategy for the faint-hearted due to the high risk companies that qualify. Graham sought safety from individual bankruptcy risk by diversifying his portfolio with a large numbers of companies – he suggested 30. more »
Price to Net Net Working Captal compares the Price to Benjamin Graham's valuation measure, Net Net Working Capital which is defined as Cash + Short Term Marketable Investments + Accounts Receivable * 75% + Inventory * 50% of Total Liabilities
This is the daily average of the cumulative trading volume during the last three months.
As an example, the 3 month average volume of Vodafone, admittedly a mega-cap, as of May 15th 2015 was 59,376,983.
Stockopedia explains 3m Avg Vol...
Large institutional funds cannot trade in and out of a stock without leaving their footprints, and learning to read the signs in daily and weekly volume is important. If current volumes are higher than previous volumes while price is increasing, it may be a sign of fund accumulation