[What are you buying today?]

This is great, so much information embedded in your post.  I have been looking for a good set of shorts so I will do some dd on your put names.  Curious what you mean with your japanese netnet, do you have a fixed period of time you will wait before selling?

 

I sell netnets at NCAV, but after 1 year i reassess the situation and when i find something a lot cheaper i make the switch.

 

I sell net-nets often below NAV (80% of NAV is typical for me). But I buy them even cheaper...typically at least <60% of NAV. And I rebalance often...almost continuously actually. I'm thinking of lowering to once a quarter. My backtests indicate quarterly rebalancing is significantly better than annual rebalancing. The following appear to really work well in a "net-net" like strategy:

 

1) Large cash balances....lots of cash is far far better than lots of inventory or receivables

2) Few financial but not necessarily operating liabilities

3) Lots of extra, not necessarily current assets

 

What you are basically looking for is a company in an excellent liquidity situation because they have a tonne of cash a few financial liabilities (operating liabilities are far less important). And simultaneously a low price to book ratio...lets say around 60%. Examples of such companies are:

 

1) KDM Shipping

2) Namura Shipbuilding

3) Kikukawa Enterprise Inc

4) STR Holdings

5) Walker Innovation

 

Interestingly 2) and 3) often don't show up on net net screens.

 

In other words net nets are really a combination of two things:

1) cheapness

2) great liquidity => immunity from bankruptcy

 

Traditional nets-nets which may include companies with a tonne of inventory and often lots of financial liabilities...can be terrible.

 

Rukawa,

 

Thanks for your post!  Is Namura trading below NCAV?  If so, please help me with the math if you have time.

 

Many thanks!

[Net-Nets & Nevada, Inc.]

Hey rb,

 

Thanks for the response! I'm not too familiar with this.  I'll have to do some digging.  Do you have some examples of how that helps for fraudulent reporting?

 

I use screener.co

 

 

[Net-Nets & Nevada, Inc.]

Geoff Gannon may be on this site, but I read on his blog that, "surprisingly", a lot of deep value stocks (i.e., net-nets) that show in up domestic screens are incorporated in Nevada.

 

You are going to see a surprising amount of U.S. listed net-nets that are really companies controlled by Chinese citizens doing business in China. Don’t touch those. You’re also going to see a surprising number of companies incorporated in Nevada. I’m not saying those are frauds. But, I am saying that if you pay close attention to the stocks already in your portfolio – those will tend to be incorporated either in Delaware or in the state the company has long been doing business (where it was founded). If you compare your current portfolio to a blind net-net screen, I think you’ll find the results of that screen will have a greater percentage of companies incorporated in Nevada than your portfolio does.

 

For example, I did a quick search for stocks trading below NCAV with positive earnings that weren't obvious reverse-merger stocks. (The list is not long nowadays.) Nova Lifestyle (NVFY) was one stock that came up.  Their 10-K reveals: incorporated in Nevada.  A little digging inside: a Chinese reverse merger.

 

Is this no coincidence?  Does Nevada law have lax standards that make it easier for potential fraudulent reporting?

 

I wonder if I should just eliminate Nevada stocks from my screens.  Do fellow value investors out there do the same?

 

Any and all insights would be most helpful!

 

 

 

[Free screener for 13D's?]

I'm looking for a free screener for 13D's.  Anyone know of one?  For now, I check ticker by ticker on EDGAR, but looking for an easier way.  Preferably I'd like to batch load watchlists to scan for any activity, but anything free that is easier than EDGAR would be kindly appreciated!

[Pabrai's lunch with Munger & Buffett]

According to Mohnish Pabrai, when he and Gary Spier paid to have lunch with Warren Buffett and Charlie Munger, one of the three pieces of notable advice Munger mentioned was “carefully study spinoffs.”

 

Does anyone know the other two?