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"

"Today we are finding values in Japan that have not been seen since the mid-1970s in U.S. markets and in some ways they are even better in Japan now. As you know nearly all Japanese companies have share portfolios. If you adjust for the value of these, about 35% of the 3,000 listed companies on the Nikkei trade at below book value and roughly 10% are trading below net cash and at BIG discounts to their intrinsic value,"

"hundred securities trading below our punitive definition of net cash. In those cases you are in effect paying a negative price for the business. I should add that all the companies that we are looking at, or that we own, are making money. In many cases they have no debt and in about 80% of cases, they are not spending their cash flow so they are generating free cash. That’s because they’re frozen in the headlights like mesmerized rabbits because of the huge fall in the Nikkei from 40,000 to well below 20,000."