[ARCHIVES] Ben Graham’s Net Nets: Seventy-Five Years Old And Still Outperforming

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[ARCHIVES] Ben Graham’s Net Nets: Seventy-Five Years Old And Still Outperforming

Ben Graham’s Net Nets: Seventy-Five Years Old and Outperforming

Tobias Carlisle

Eyquem Fund Management

Sunil Mohanty

Bonhoeffer Fund July 2022 Performance Update

Screenshot 27Bonhoeffer Fund's performance update for the month ended July 31, 2022. Q2 2022 hedge fund letters, conferences and more The Bonhoeffer Fund returned 3.5% net of fees in July, for a year-to-date return of -15.8%.   Bonhoeffer Fund, LP, is a value-oriented private investment partnership for . . . SORRY! This content is exclusively for Read More

University of St. Thomas

Jeffrey Oxman (corresponding author)

University of St. Thomas

Abstract

The strategy of buying and holding “net nets” has been advocated by deep value investors for decades, but systematic studies of the returns to such a strategy are few. We detail the returns generated from a net nets strategy implemented from 1984 – 2008, and then attempt to explain the excess returns (alpha) generated by the net nets strategy. We find that monthly returns amount to 2.55%, and excess returns using a simple market model amount to 1.66%. Monthly returns to the NYSE-AMEX and a small-firm index amount to 0.85% and 1.24% during the same time period. We conclude by examining potential factors to explain the excess returns on the net nets strategy. We examine the market risk premium, small firm premium, value premium, momentum, long-term reversal, liquidity factors, and the January effect. Of the various pricing factors, we find only the market risk premium, small firm premium, and liquidity factor are significant. We also note about half of the returns are earned in January. However, in