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Performance of net-net's


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There are often posts on here asking about net-net's or mentioning net-net's, I also write about them often on my blog so I was curious as too see how they actually performed over the past year.  This is looking at all of the net-net's on my screen not just companies I had purchased or researched.


I screened about a year ago for companies that were debt free and trading below ncav.  I then took that data this year and found the 1yr returns for those stocks.  I have a more complete writeup on the blog, but I've attached the spreadsheet with the summary results and data to this post.


Here is the summary info:

Companies starting 2011 214

Companies ending 2011 176


Equal weight return -0.26


Australia -3.354

Belgium -15.25

Canada 27.74

France -15.5

Germany 11.1

Hong Kong -40

Italy -4

Japan -8.19

Netherlands -1.5

UK -6.63


FCF Positive firms -10.33

Dividend Payers -15.77

Mcap > 1m -13.44

Mcap < 1m 58.92


Number of companies with

Positive returns 30

Return > 10% 21



The original blog post (I have some other observations, methodology):http://www.oddballstocks.com/2012/01/international-net-nets-one-year-later.html


I'm interested in comments or your observations.  I think what surprised me the post was how much of the performance was related to a few stocks that went up a lot, taking those out and the results beat the benchmark but are a bit more mediocre.




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I think what surprised me the post was how much of the performance was related to a few stocks that went up a lot, taking those out and the results beat the benchmark but are a bit more mediocre.


I'm not surprised by that feature, it is very common with value stocks and other stocks more generally.  For instance, Dr. George Athanassakos had a paper on low P/E & low P/B stocks but one of the more interesting features (IIRC) was that he provided both average and median returns.  The averages were larger than the medians which indicates a skewed distribution of returns.  I've also come across studies on the market as a whole re: skew but I'm forgetting the authors at the moment.


Anyway, as a rule of thumb, in a 10 stock value portfolio you might see a few might do really well, most so-so, and a few poorly.  Nonetheless, you can still get outsized overall returns.  That's largely been my experience.

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We find that when all the choices are outliers, the return over 1 yr is really the wrong metric. Best we can do is decide the intended length of the holding period, guess the exit price, determine the IRR, then rank the choices from highest to lowest.  Small errors can really change the ranking.


The better metric is whatever you’re using for your MOS. Set the metric for the portfolio at some min/max number, & let it be. If the net-net doesn’t work out, at least it still worked for the portfolio overall.





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Thanks for the comments


NormR - I've had similar experiences in my own portfolio, but what surprised me is the extremeness of the data.  I've always heard the rule of five, for any five given stocks one will do terrible, one really well, and the other three average.  Median is -20.5 which is below the FTSE Small Cap ex-US benchmark (-19), I should have included that.


Racemize - I don't have any hard numbers but probably 25-30% of my portfolio at any given time, the size fluctuates as opportunities come and go.  For net-net's I'm not a buy and holder I buy below NCAV and sell once NCAV is reached.  In a few rare circumstances the business improves so much, or something fundamental changes and I'll continue to hold the company.  I only have one stock like this, the rest I sell on the way past NCAV.  Just a note that momentum is usually strong with these stocks, it's no uncommon for them to start to rise and continue for a while, I try to ride the wave if possible.


SharperDingaan - I would agree with you, the 1yr was arbitrary and to satisfy my curiosity.  I know an astute investor could have taken advantage of selling early in a few cases.  For example Dainichi was a company I purchased, at the end of the year it was up 22%, but it could have been sold for 40% more a few months back.  I sold about 15% off the high.  Obviously my return is higher due to the better timing and shorter holding period, I know there were other stocks that were similar.

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  • 11 months later...

So how have your net-nets performed in 2012 in relation to the Wilshire 5000 Total Market ETF?


In the same spirit here is a recent article on screening for net-nets:




I'm always on the look-out for the next potential net/nets (companies trading below net current asset value), and when markets are facing selling pressures, more of these are typically revealed.


That being said, I've screened for companies trading at between 1 and 2 times net current asset value, with market caps greater than $200 million, but this time with an added twist. They must also be trading below tangible book value in order to qualify. That's a very stringent screen, which not surprisingly reveals just 10 names.

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