NCAV: Q1-10

While Our Man isn’t sure how long he’ll be able to run the Absolutely Value bucket, now is nonetheless a good time to at least start it.  The bucket is initially going to be based on Ben Graham’s NCAV work, and Our Man will be buying stocks which have a market cap below 65% of their Net Current Asset Value (= Net Current Assets – Total Liabilities).  Additionally, Our Man will limit himself to stocks with a market cap >$50mn, and will do a little qualitative work on each name he comes up (and thus may potentially remove some).

Without further ado, let’s take a look at the stocks that passed the test:

So, it seems our Absolute Value bucket will start with a mere 3 stocks…

What didn’t make the test?
Based on the mechanical CapitalIQ screen, eleven stocks made the list but 8 were rejected.  Why?
- 2 (NINE/XING) had stale financial statements (i.e. 6 months+ out of date) hence more questionable NCAV values
- 2 (NCTY/ULCM) no longer made the 65% criteria (i.e. they had marginally passed the screen, but the price rose between last week and today)
- 3 (CCRT/PCC/QCC) were Financial companies, where the screen appeared to use Total Assets rather than Current Assets due to the way they present their financial statements.
- 1 (NUHC) was rejected for qualitative reasons; the company just lost its largest customer (33% of revenues), for which it had a number of specially trained staff, and 40% of its current assets are represented by inventory (primarily for this customer).