I have an amazing net net that I am long. Ticker: MMM.V (Minco Capital on TSXV.) I will put a separate post about it. It's a microcap (market cap 4 MM).
Net cash is defined as cash and cash equivalents minus total liabilities.
Criteria:
- P/Cash under 1
- P/B under 1
*Do not make Debt/Equity ratio under 0.1. Don't do anything to it, you will miss out on net-net stonks!
Also on the top right corner I chose USA companies because Chinese companies lie.
What does this mean? These are companies that have higher liquidation values than market cap, Guaranteed. You make money, guaranteed.
This is not enough, you must sift through the stonks, to make sure they are net-nets.
WARNING: If the company is bleeding cash, eventually the net cash (see definition) will drop to levels where it is lower than market cap, effectively not making it a net-net anymore, and not prone to upward stonk movement. Make sure company isn't bleeding too much cash and you have a large margin of safety.
How to watch for this? Keep a close eye on how much negative EBITDA there is every quarter. This shows their cash bleeding. Because impairments and depreciation and amortization are excluded.
Net-net examples (real life): as of April 10 2021.
GLTO: Market Cap= $159 MM, Net Cash= $159 MM. 0% return. Bleed rate= $8 MM/quarter (EBITDA)
ASMB: MC= $165 MM, NC = $173 MM. Bleed rate= $25 MM/ quarter***
NXTC: MC= $265 MM, NC = $272 MM. Bleed rate= $15 MM/ quarter***
Almost net-net:
TARA: MC= $173 MM, NC = $165 MM. Bleed rate= $8 MM/ quarter
ODT: MC= $146 MM, NC = $115 MM. Bleed rate= $0 MM/ quarter. Stopping operations. I made a post about this (blog.)
ABIO: MC= $52 MM, NC = $36 MM. Bleed rate= $2 MM/ quarter
LUMO: MC= $94 MM, NC = $88 MM. Bleed rate= $5 MM/ quarter
I am long:
MMM.V: MC= $4.33 MM, NC = $11 MM. Bleed rate= $0.1 MM/q.
157% upside. There is significant risk. I will explain in the blog post.
***I'm including short term investments part of NC, I don't know how much fair value really is. You must be careful. You can get trapped. ASMB, NXTC.
Look for overlooked stocks with insider buying and low volume (that means stonk price will be easily pulled up.)
You will notice all these are bio-tech stonks...
I enjoy your blog but I don't understand anything, and I'd like to be able to get started. Where should I start? I've linked my Facebook in case that's easier to answer. Thanks!
ReplyDeleteyeah my blog is all over the place. i am working to organize it better. the way i started was that i read 300 Investopedia articles and then went to reddit to confirm my value investing thesis. but this is not realistic and replicable and smooth. what you can do is read the "5 rules of successful stock investing" . the pdf is free on libgen.is so you don't have to pay, that's why im even recommending the book.
Deletebefore you go into stocks, you must understand businesses and how to value them, and that's what this book teaches you. we can have convos and go over specific questions.
book by pat dorsey. what i just mentioned.
Deleteit's a short book only 200 pages. much better than intelligent investor, security. that is just crap that everyone recommends. it is must know, but for beginners, it is dry and you won't understand anything it's pointless. this book is quick, easy, and packed with applicable content. key word: applicable content, not just theory.
Delete