Buy These 5 Stocks For Less Than Liquidation Value

In this edition of Watchlist Wednesday, we highlight five of the top stocks qualifying for the Net-Net Working Capital (NNWC) (1) screen.

NNWC is similar to the NCAV screen except it is more stringent. Graham knew that companies undergoing liquidation would not necessarily sell all current assets at book value.

In order to add a level of safety, he felt it beneficial to discount the accounts receivables and inventories when calculating current assets.

This article appeared first on The Stock Market Blueprint Blog.

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NNWC Description

Like NCAV, NNWC finds stocks trading for less than the difference between current assets minus total liabilities, and no regard is given to the company’s long-term assets or future profits.

But where NCAV accounts for 100% of a company’s current assets, NNWC builds a larger margin of safety by discounting both receivables and inventory.

Liquidation Value

To calculate the liquidation value of a stock using the NNWC, the stock screen values a firm’s current assets at the following levels:

– Cash & Cash Equivalents: 100%

– Accounts Receivables: 75%

– Inventories: 50%

– Long-Term Assets: 0%

Here is a breakdown of the five stocks with the lowest price to NNWC.

China Green Agriculture, Inc (NYSE:CGA): Engages in the research, development, production, distribution, and sale of various types of fertilizers and agricultural products.

– Cash & Cash Equivalents (100%): $103 Million

– Accounts Receivables (75%): $108 Million

– Inventories (50%): $43.5 Million

– Total Liabilities: $48 Million

– Total Shares: 37 Million

– NNWC: $5.62

– Current Price: $1.28 (closing price on 11/8/16)

– Price/NNWC: 23%

Emerson Radio Corp (NYSEMKT:MSN): Designs, sources, imports, markets, and sells various houseware and consumer electronic products in the United States and internationally.

– Cash & Cash Equivalents (100%): $53 Million

– Accounts Receivables (75%): $1 Million

– Inventories (50%): $2 Million

– Total Liabilities: $4 Million

– Total Shares: 27 Million

– NNWC: $1.91

– Current Price: $0.96 (closing price on 11/8/16)

– Price/NNWC: 50%