In what paper or book did Ben Graham first propose his Net-net strategy

[rukawa]

I am writing a research paper and was wondering if anyone knows where Benjamin Graham first proposed his net-net strategy of buying stocks that sell at 2/3rds of NCAV.

[oddballstocks]

1st and 2nd edition of Security Analysis.  I believe the 2nd edition is a much better chapter, it's refined and has better examples.

[Packer16]

He referenced buying a group of stocks at a discount to NCAV in an article for the Magazine of Wall Street in July 1924 & subsequent performance reviewed in a 1925 article for the same magazine.  He does mention in 1934 Security Analysis that many more asset bargains were available in the Depression than in the past.

 

Packer

[racemize]

Do you have electronic copies of those articles?  I don't think I have those in my graham compilation.

[oddballstocks]

Do you have electronic copies of those articles?  I don't think I have those in my graham compilation.

 

My guess is you're going to have to go microfiche on these things.  Maybe you could be the one to microfiche it, print then digitize?  There's a lot of value investing karma out there for you if you do!

[oddballstocks]

Penn State college library has it

[Packer16]

These articles are from "Ben Graham on Investing" a book published by David Darst.  This is a great set of articles and shows Graham's evolution from a bond investor to a stock investor. It illustrates how he analyzed securities across the capital structure to find mispricings.

 

Packer

[rukawa]

These articles are from "Ben Graham on Investing" a book published by David Darst.  This is a great set of articles and shows Graham's evolution from a bond investor to a stock investor. It illustrates how he analyzed securities across the capital structure to find mispricings.

 

Packer

 

Thanks Packer!! Had no idea about this book.

 

1st and 2nd edition of Security Analysis.  I believe the 2nd edition is a much better chapter, it's refined and has better examples.

 

He talks about NCAV stocks but I don't think he ever explicitly advocates buying stocks selling at 2/3rds Market Cap. In fact I don't think he ever really explicitly outlines any investment strategy throughout the whole of Security Analysis except in a very oblique manner.

[rukawa]

Do you have electronic copies of those articles?  I don't think I have those in my graham compilation.

 

My guess is you're going to have to go microfiche on these things.  Maybe you could be the one to microfiche it, print then digitize?  There's a lot of value investing karma out there for you if you do!

 

I ordered the book. But there are other out of print references, books we as a community ought to digitize. I think the very first edition of the intelligent investor would be a candidate. Its in all the major university libraries and sells for >$500 on the used market. I think Kraven was the one who advocated reading it. Maybe I should start a thread.

[rukawa]

Just got the book "Benjamin Graham on Investing" that Packer suggested. I believe Packer is referring to the two articles:

"Eight stock bargains off the Beaten Track"

"Bargain-Hunting Not Thrilling But -- Immensely Profitable"

 

These articles aren't what I originally wanted since they cover "Cash-Asset Stocks" whereas I am looking for when Graham first articulated the NCAV strategy of buying stocks at 2/3rds NCAV. However, they are something I should have been looking for, if I had any idea they even existed.

 

I knew that Graham had considered not only Net Current Asset Value as a measure of cheapness but also Cash Asset Value in Security Analysis. But I had no idea about these articles. My study is going to be on Negative Enterprise Value which almost exactly aligns with Cash Asset Value. It appears Graham had anticipated this idea.

 

Tobias Carlyle in his article:

http://www.valuewalk.com/wp-content/uploads/2014/07/benjamin-grahams-net-nets-seventy-five-years-old-and-outperforming-full-tables1.pdf

 

cites Henry Oppenheimer on Graham advocating Net-nets. Oppenheimer never cites anything...he just kind of states that its common knowledge that Ben Graham proposed buying stocks selling at 2/3rds NCAV. This suggests that Graham may have stated this in an Oral presentation to some society of financial analysts. Not sure. I not only don't know where he first proposed this...I actually can't find anything in writing indicating he proposed it at all.