Stocks Selling Below Cash
In the 1940 Edition of Security Analysis, Graham & Dodd put forth the following:
Common stocks that (1) are selling below their liquid-asset value, (2) are apparently in no danger of dissipating these assets, and (3) have formerly shown a large earning power on the market price, may be said to truthfully constitute a class of investment bargains. They are indubitably worth considerably more than they are selling for, and there is a reasonably good chance that this greater worth will sooner or later reflect itself in the market price. At their low price these bargain stocks actually enjoy a high degree of safety, meaning by safety a relatively small risk of loss of principal.
While the authors further go on to say that this type of operation fares best during moderate price levels and state that leading issues may be as safe to purchase as secondary issues during times of depressed prices, in modern times these types of issues haven’t been nearly as prevalent as they once were. However, during the recent sell-off this Fall, more and more of these issues are popping up. I have screened for companies that have D/E (mrq) less than or equal to 1%, a positive 5-year average return on investment, daily volume in excess of 100,000 shares, and have cash/share in excess of the current stock price.
I acknowledge that this analysis is incomplete as off balance sheet obligations that are determined to be financing decisions ought to be considered as debt in any thorough analysis. Cash burn rates ought to be considered, as well. I have also avoided including financials due to the more complex nature of their balance sheets.
Immersion Corporation (IMMR)- Cash/Share: $4.39, Price: $4.21
Trident Microsystems (TRID)- Cash/Share: $3.67, Price: $1.65
Actions Semiconductor (ACTS)- Cash/Share: $3.04, Price: $1.45
Matson Technology (MTSN)- Cash/Share: $2.37, Price: $1.01
SiRF Technologies (SIRF)- Cash/Share: $1.60, Price: $1.38
Novatel Wireless (NVTL)- Cash/Share: $4.50, Price: $3.15
Sierra Wireless (SWIR)- Cash/Share: $6.54, Price: $5.02