Our world-wide net-net stocks list

These most under-valued stocks on the market made +50% annual returns for Warren Buffett in his early investments days

My cigar-butt strategy worked very well while I was managing small sums. Indeed, the many dozens of free puffs I obtained in the 1950s made that decade by far the best of my life for both relative and absolute investment performance” – Warren Buffett, Berkshire Hathaway 2014 Shareholder Letter

Buffet compared a Net-Net stock to a cigar butt that you pick up from the ground and enjoy the last puff for free, which resembles a business that trades so cheaply that you can only profit from buying it at its current depressed price 

What is a Net-Net stock?

Net-Net stocks are Benjamin Graham’s deep undervalued stocks that are traded below their net current asset value, that is defined as:

Net Current Asset Value (NCAV) = Current Assets – Total liabilities

The NCAV of a net-net stock is much greater than its Market Capitalization.

A company’s assets are composed of current assets and long term assets which includes properties, plants and equipment. The current assets are only assets that will be sold and converted to cash in the next 12 months, which means cash and equivalents, receivables and inventory.

It’s not just a rare situation were a company is traded below its liquidation value, when you buy a net-net stock you also get all the company’s long-term assets for free.

It’s not just a rare situation were a company is traded below its liquidation value, when you buy a net-net stock you also get all the company’s long-term assets for free.

Do net-net investments still work nowadays?

Net-nets are so cheap that it’s like finding a 100 dollar bill on the ground – all you have to do is pick it up and you’ll make a profitable investment. Thus, it’s not surprising that many studies and investors have proved that a basket of net-nets is capable of beating the market dramatically.

Obviously, not all net-nets yield a positive return, but if you choose only the attractive ones very selectively or buy a large basket of few tens of them and hold patiently, you will be awarded with amazing returns even today.

As Benjamin Graham wrote in the Intelligent Investor: “It always seemed, and still seems, ridiculously simple to say that if one can acquire a diversified group of [net-net] stocks at a price less than the applicable net current assets alone… the results should be quite satisfactory.”

Here are a few examples of net-net stocks that we bought in the past.

What is the best way to profit from investing in Net-Nets?

Maximal returns from a net-net portfolio requires highly selective picking after comprehensive analysis and valuation process that ensure their attractiveness. This is how Buffett has made incredible returns for his partnership for decades and we use the same strategy to pick the winners to our portfolios.

Passive investors who don’t want to do any analysis at all can also make big profits by purchasing a basket of net-nets, randomly selected from the Net-Net list that we publish on our site. All you need to do is:

  1. Buy about 20-30 net-nets from the list in an equal amount of money.
  2. Sell each stock 1 year after you bought it and replace it with a new net-net from the updated list.

Benjamin Graham recommended selling a net-net stock before the year ended if it went up by more than 50%. Nowadays the markets are much more volatile so it’s not that rare that a net-net stock jump dramatically, even by hundreds of percents. Thus it’s better to ignore this rule to benefit from these winners.

In the site we present all the net-net stocks trading on main Stock Exchanges around the world with a market cap above $2.5 million, so you can diversify your portfolio widely.