Hi, guys!
When I’m having a conversation with other investors, I often feel a bit weird. Like I’m having a dildo glued to my forehead or something. Based on the facial expressions the other person gets when I tell them what I’m investing in, I could as well have had one.
I feel like most people are obsessed with analyst’s price targets, DCFs and endlessly doing research on the same companies as everybody else, hoping to get an “edge”. Let’s say, it’s not for me. Not that I think their way is wrong or anything. There’s a lot of ways to earn money in the market. It doesn’t come naturally to me, that’s all.
What I’m most excited about is net-nets. But net-nets are rarely good companies. Hell, you have to be quite bad if your owners want to sell you below your liquidation values. But, what’s the lure of buying something as unwanted as net-nets? Well, I guess that’s a question for another day.
They are not as rare as you think.
I think investing strategies such as net-nets often are quite binary in the way they’re perceived. You either get it, or you don’t – a bit like lutefisk, marmite or k-pop.
So, when I (once every leap year) actually meets someone who “gets” it, they think these things are as rare as frogs becoming princes. But, the problem isn’t actually finding them. Well, at least not if you’re having a global perspective. If the S&P is your thing, this isn’t for you.
In January, I myself a list of stocks that either are, or are close to being, net-nets and net-cash. As of today, the list consists of 250 stocks – found without a dedicated net-net screener. Additionally, I’ve only picked stocks that my Norwegian brokerage let’s me buy. For non-Norwegian people: Let’s say it leaves a lot to be desired. Oh, and before I forget: I’ve excluded exploration companies, companies without operations, financials and everything Chinese.
Of these 250 stocks, a majority is listed in Asia. Some are in Europe, a very few are in the US. Most are quite small, boring and capital intensive. You don’t find an exciting SaaS-company, some e-sport things or anything. You find pallet producers, steel manufacturers and some weird Japanese things.
Alas, the problem isn’t finding them…
You need the will of an elephant and the mental presence of a goat cheese
So, let’s say you’re looking at some numbers. You find out that the company’s stock trade with a 20% discount to NCAVPS, it trades net-cash, has a decent profit margin and is profitable.
Yay! The only thing you really find is that the company hasn’t grown in five years. Not that uncommon, actually. So, you decide to take a deeper look into the company…
And find out that they sell ink for printers in South-East Asia.
Yeah, that’s really what you’re getting into.
The main problem of buying net-nets, is that your body goes into fight, flight, freeze-mode the second you push the “order”-button in your brokerage account. No sane person would ever, logically, buy any of these things.
So, why would you?
Well, it’s easier to show than tell. Push that subscribe-button for regular net-net updates and musings from the finance industry.