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In this edition of Watchlist Wednesday, we highlight five stocks trading below their net current asset values.
Investment managers and financial media pundits often say Benjamin Graham’s famous Net Current Asset Stocks (NCAV) no longer exist. They claim the strategy can’t be implemented anymore because the stocks are too hard to find.
The Stock Market Blueprint’s NCAV stock screen currently shows a dozen U.S. listed stocks selling below their NCAV. Several more are trading just slightly above this metric.
Considering that Graham suggested investing in baskets of 10-30 NCAV stocks, there appear to be more than enough opportunities for individual investors.
Warren Buffett nicknamed it the “cigar-butt approach” because “a cigar-butt found on the street that has only one puff left in it may not offer much of a smoke, but the ‘bargain purchase’ will make that puff all profit.”
The screen finds stocks trading for less than the difference between current assets minus total liabilities. There is no regard given to the company’s long-term assets or future profits.
Here is a breakdown of the five stocks with the lowest price to NCAV as found on The Stock Market Blueprint’s NCAV stock screen.
China Green Agriculture, Inc. (CGA)
China Green Agriculture, Inc., through its subsidiaries, engages in the research, development, production, distribution, and sale of various types of fertilizers and agricultural products.
The company markets its fertilizer products to private wholesalers and retailers of agricultural farm products in 27 provinces, 4 autonomous regions, and 3 central government-controlled municipalities in China.
The company is based in Xi’an, the Peoples Republic of China.
- Current Assets: $312 Million
- Total Liabilities: $24 Million
- Total Shares: 37 Million
- Net Current Asset Value: $7.79
- Current Price: $1.43 (opening price on 9/7/16)
- Price/NCAV: 18%
American Lorain Corporation (ALN)
American Lorain Corporation, through its subsidiaries, develops, manufactures, and sells various food products in the People’s Republic of China.
ALN provides convenience foods comprising ready-to-cook food products, ready-to-eat food products, and meals ready-to- eat products consisting of meal kits with self-heating devices or microwavable kits, such as microwavable rice boxes for military use, as well as for camping, traveling, and other occasions.
The company markets and sells its products to supermarket chains, mass merchandisers, wholesalers, and others, as well as to third-party distributors. It also exports its products to the Asia Pacific, Europe, the Middle East, and North America.
American Lorain Corporation is headquartered in Junan County, the People’s Republic of China.
- Current Assets: $175 Million
- Total Liabilities: $84 Million
- Total Shares: 38 Million
- Net Current Asset Value: $2.39
- Current Price: $0.62 (opening price on 9/7/16)
- Price/NCAV: 26%
Emerson Radio Corp. (MSN)
Emerson Radio Corp., together with its subsidiaries, designs, sources, imports, markets, and sells various houseware and consumer electronic products in the United States and internationally.
The company offers its products primarily under the Emerson brand name, and licenses its trademarks to others on a worldwide basis for various products. Emerson Radio Corp. markets its products primarily through mass merchandisers.
The company was founded in 1948 and is headquartered in Hackensack, New Jersey. Emerson Radio Corp. operates as a subsidiary of S&T International Distribution Ltd.
- Current Assets: $60 Million
- Total Liabilities: $4 Million
- Total Shares: 27 Million
- Net Current Asset Value: $2.05
- Current Price: $0.88 (opening price on 9/7/16)
- Price/NCAV: 43%
Sears Hometown & Outlet Stores, Inc. (SHOS)
Sears Hometown and Outlet Stores, Inc. engages in the retail sale of home appliances, lawn and garden equipment, tools, and hardware in the United States.
The company operates in two segments, Sears Hometown and Hardware, and Sears Outlet. As of April 30, 2016, the company, and its dealers and franchisees operated 1,150 stores in 50 states in the United States, as well as in Puerto Rico and Bermuda.
Sears Hometown and Outlet Stores, Inc. is headquartered in Hoffman Estates, Illinois.
- Current Assets: $482 Million
- Total Liabilities: $213 Million
- Total Shares: 23 Million
- Net Current Asset Value: $11.82
- Current Price: $5.54 (opening price on 9/7/16)
- Price/NCAV: 47%
Stanley Furniture Co, Inc. (STLY)
Stanley Furniture Company, Inc. designs, manufactures, and markets residential wood furniture products in the United States and internationally.
It offers upscale wood residential home furnishings. The company sells its furniture under the Stanley Furniture, Coastal Living, and Stone & Leigh brand names through independent sales representatives.
Stanley Furniture Company, Inc. was founded in 1924 and is based in High Point, North Carolina.
- Current Assets: $55 Million
- Total Liabilities: $16 Million
- Total Shares: 14 Million
- Net Current Asset Value: $2.78
- Current Price: $1.84 (opening price on 9/7/16)
- Price/NCAV: 66%
Late in his life, Benjamin Graham estimated that the NCAV strategy earned him an average of 20% per year over 30 years.
Due to the nature of deep value strategies such as the NCAV, average investors will find numerous reasons not to buy the above stock.
Disciplined investors, on the other hand, will find success following such a simple investment strategy.
You can build your own portfolio using the stock screens on TheStockMarketBlueprint.com.
Check out our Shadow Stock Portfolios to see real-world examples of implementing systematic investment strategies.
Mitchell Mauer is the Founder of TheStockMarketBlueprint.com. The Stock Market Blueprint is a site that finds value stocks for investors building long-term wealth. The site’s investment philosophy is anchored in principles established by Benjamin Graham and his most reputable followers over the last 100 years.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.