Graham net-nets
Buy the current assets for less than they are worth.
Net current asset value is current assets minus every liability. When it exceeds the market cap, the market is handing you the working capital and charging nothing for the business attached to it. The liquidity and leverage rules exist so that discount survives long enough to close.
Educational research tooling, not investment advice. A screen is a filter over public data, not a recommendation.
What the NCAV screen tests
Graham's net-net: buy the current assets for less than they are worth after settling every liability, and insist the balance sheet is liquid and unlevered so the discount survives.
The rules, one by one
Every rule below is applied on every scan and reported with the value it was tested against, pass or fail. Each threshold is yours to change.
- NCAV / Market Cap
- Net current asset value (current assets − total liabilities) divided by market cap. Graham's 2/3 rule means paying at most two thirds of NCAV, i.e. NCAV of about 1.5x market cap or more.
- Current Ratio
- Current assets over current liabilities. The asset discount is only real if the company can pay next year's bills without a forced sale.
- Debt / Equity
- Total debt over shareholders' equity. Lenders rank ahead of you, so leverage can consume the discount before it closes. Companies with negative equity are excluded rather than scored as unlevered.
- Dilution
- Change in share count year over year. Positive means new shares are transferring your claim to someone else; negative means buybacks. Based on annual filings, so it lags.
Who this screen is for
- Investors willing to hold illiquid micro-caps for a re-rating that has no schedule.
- Anyone running a basket rather than a concentrated position — net-nets work statistically, not name by name.
- Readers who will open the filings to check the assets are what the balance sheet says.
- Anyone who needs the position to be liquid on demand.
- Investors looking for quality compounders — a net-net is cheap for a reason and usually stays cheap for a while.
NCAV FAQ
What is Graham's two-thirds rule?
Pay at most two thirds of net current asset value, which is the same as requiring NCAV of roughly 1.5x the market cap or more. The screen's default threshold is that ratio, and it is tunable.
Why require a current ratio as well as NCAV?
The asset discount is only real if the company can pay next year's bills without a forced sale. A net-net that has to liquidate inventory into a bad market realises far less than book.
Are financials and REITs included?
They are screened but flagged as incomparable on book value. Bank and property balance sheets are not comparable to industrials, so the output should be treated as suspect rather than as a signal.
Why does every screen test dilution?
A discount that closes while the share count grows is a discount someone else collected. Dilution is measured from annual filings as the year-over-year change in shares outstanding, so it lags — a company that issued stock last quarter can still pass.
Other screens
Negative EV
Enterprise value is market cap plus debt minus cash. Below zero, the cash net of debt exceeds what the shares cost — you are paid to take the operating company. The price/sales and liquidity rules are there to make sure there is a business attached and that the cash is genuinely available.
Acquirer's Multiple
EV/EBITDA is what an acquirer of the entire business pays for its operating earnings. It is used instead of P/E because it is indifferent to how the company is financed — debt and cash are already in the numerator. The screen adds conservative leverage and a share count that is not growing.
Simple Way
Profitable, cheap on earnings and on book, funded mostly by equity rather than creditors, and yielding above the market. The dividend is the point: a slow re-rating is far easier to sit through when the position pays you for the wait.
Five scans, no card.
Run NCAV over the universe you choose, open any company, and read the rules it passed and the ones it did not.
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