Net-Net Working Capital Acquisition

“current asset value per share as net-net working capital per share, and made it the sine qua non of his investment process.”

“assuming that their businesses are worth six times earnings before interest, depreciation and tax. There is more, because about 150 companies with market caps of $125 million or more are trading at below net-net working capital. That is approximately the same number as there were in the US in 1975 and some of these are very big businesses indeed. In over a hundred instances you can end up paying less than nothing. Some of them have net cash almost equal to their market value. In our calculations we assume that they sell their share portfolios and that they are then taxed on this at 50%. I’m not even sure that we should be deducting the tax to establish our margin of safety, but we do it anyway. Then we net out the short and the longterm debt. We don’t include receivables or inventories in the computation and when we have done all that we can still find over”