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Negative Enterprise Value Screen 200 Qualifying

Negative Enterprise Value is a deep value bargain strategy inspired by the writings of investment writer, Jae Jun. It looks for companies that are priced so cheaply by the market that their cash balance is worth more than their enterprise value (the sum of the company's market cap and total long term debts). On paper, these stocks present an arbitrage opportunity: you could buy all of the debt and equity using the company's cash to cover the cost and simply pocket the difference. Jae Jun says: "If done correctly, it looks like this strategy is hugely profitable, but it does come with a lot of volatility." Jae Jun's back-testing for the US market exhibited significant outperformance over a 10 year period. A word of warning: company cash balances change all the time, so it's essential to know precisely how much cash a company has got. Likewise, make sure all debts are taken into account when it comes to calculating enterprise value.

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Negative Enterprise Value

by Jae Jun

Back-tested by Jae Jun on Old School Value for the US market, this strategy exhibited significant outperformance over a 10 year period, albeit with significant volaility.

 

This screen uses the following criteria:

  • EV £m < 0
  • Mkt Cap £m > 15
  • Economic Sector not in (Financials)

Results are sorted by:

  • EV £m in descending order


And limited to the first 200 Results


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Performance Tracking


Returns FTSE 100
1 week -4.6% -5.5% -3.3% -0.6% -5.0% 1.9% -0.7% -0.7%
1 month -4.2% -5.6% -11.9% 10.5% -18.0% 4.4% 5.0% -0.7%
3 months -9.0% -14.7% 5.0% -8.6% -11.9% 21.1% 3.6% -7.4%
6 months -1.4% -10.0% 0.2% -16.1% -20.4% 65.1% -1.1% -10.0%
1 year 9.6% -5.7% 12.9% -13.0% -25.9% 84.6% -0.5% -5.1%
2 years 28.0% 41.7% -12.8% 27.1% 5.8% 122.5% 20.1% 3.3%
Annualised -2.5% -3.0% 17.4% 10.6% -5.0% 44.8% 23.5%
 
Risks
Max Drawdown -70.6% -58.9% -64.6% -37.5% -45.1% -10.2% -22.7%
Avg Holdings 9 16.8 22.7 1.9 4.2 25 7.9
Diversification Moderate Good Good Low Low Good Low