See you there!

On July 17, 2009, I ran a Yahoo Finance stock screen for stocks trading at a low P/B and relatively high cash per share. I then looked at the individual balance sheet of every stock and compiled the list below of all stocks from the screen that were trading at less than 1.1 times their net-net working capital.

I have been following their performance and below is an update (original post here):

(1 – NUHC was acquired at $7.00 per share by Arrow Electronics during the study period)

As you can see, the S&P 500 increased 40.7% between 7-17-09 and 3-2-11 (23.3% annualized) while on average, the NNWC stocks increased 81.3% (44.1% annualized) over the same period.

Of the 37 NNWC stocks, 12 underperformed and 25 outperformed the S&P 500 during this period.

DISCLOSURE: Author has no positions in any of the stocks mentioned in this article

Asta Funding is in the business of buying portfolios of distressed consumer receivables (primarily charged off credit card receivables) for pennies on the dollar. Historically, they had paid up to approximately $15 million to purchase smaller portfolios of these assets. Then in March 2007, they paid $300 million to acquire one large portfolio. I will refer to it as the “Palisades Portfolio,” but if you are reading their SEC filings it is also sometimes referred to as the “Great Seneca Portfolio,” “The Portfolio Purchase,” and a few other names. Despite the rosy nomenclature, it has been anything but great. Almost immediately, the collections fell dramatically behind expectations.

To purchase the portfolio, Asta formed a wholly-owned subsidiary, “Palisades XVI.” The $300 million was financed with a $227 million loan from Bank of Montreal, and $75 million from the parent company’s line of credit.

The Bank of Montreal note was initially non-recourse to the parent company – but as collections on the Palisades Portfolio deteriorated, the loan was repeatedly amended to now include an $8 million limited guarantee from the parent company. Additionally, ALL cash flow from the Palisades Portfolio is now used to pay down the principal balance on the loan.

For the following reasons, I think it makes the most sense to look at Asta Funding and the Palisades subsidiary separately:

- The Palisades Portfolio value is very uncertain. The company has already taken impairments of over $83 million against it, moved it from the interest method of accounting to the cost method (essentially saying they can’t predict future cash flows), collections are WELL behind initial expectations, and we continue to be in a difficult environment for this business.

- Because it is now on the cost method of accounting, all cash collections from the Palisades Portfolio are recognized as return of principal and NO income is recognized until the full carrying value has been recovered.

- All cash flows from the Palisades Portfolio go to pay down the Bank of Montreal loan. So when looking at free cash flow to equity (cash flow available for new purchases, dividends, share buybacks etc), the subsidiary is basically a wash.

- And most importantly, the parent only has an $8 million limited recourse guarantee on the subsidiary loan.

Here is the balance sheet, as reported 9/30/09:

At a P/B of just 0.63, Asta seems to be cheap relative to its competitors (ECPG and AACC, for example – more on this in Part 2). But because of the issues surrounding the Palisades Portfolio in particular, I have also created an adjusted version of the balance sheet reflecting the following (this is just an update from what I did in Part 1 based on the previous 10-Q):

- The Bank of Montreal forecloses on the Palisades Portfolio, seizing the “Restricted Cash,” (which is cash collected but not yet paid towards the loan principal balance), and acts on the $8 million limited guarantee from the parent.

- Arbitrarily reducing the book value of the “interest method” receivable portfolios by a further 25% and the other “cost recovery method” portfolios by 50%. See part 2 for a detailed discussion of the impairments already taken by the company. This additional haircut just adds to the margin of safety.

- A “Hidden Value Asset” of $40.7 million, equal to 1x trailing earnings from fully-amortized portfolio (receivables with no book value that are still throwing off cash – much more on this in parts 1 and 2).

Comparable P/B Ratios:

Here is what Asta looks like compared to a couple of publicly traded competitors when you exclude the Palisades subsidiary. Doing so captures the fact that most of the company’s debt is non-recourse to the parent.

As you can see, Asta (excluding Palisades) offers the cheapest P/B despite the fact that it has taken far more impairments to its book value than its two competitors. (What each company’s “proper” impairment should be is a different question). It also currently has less leverage, meaning it’s book value per share is less susceptible to swing from further impairments.

Finally, the amount of revenue from fully-amortized portfolios (zero basis), which is such a key piece of value for Asta (see parts 1 and 2), is somewhere between its two competitors, at least when measured as a percentage of the total distressed receivables in the portfolio.

More to come, including some of the things I don’t like about this investment. Thank you everyone for your support!

Asta Funding reported FY 2009 and Q4 earnings after the market closed yesterday and held its quarterly conference call this morning. I participated in the call – although during the Q&A I was cut short due to technical difficulties. Fortunately I was able to speak to the CFO Bob Michel on the phone for 10 minutes later in the day – I was impressed management is so accessible!

For full disclosure, I do NOT have a position in the stock, but I am watching it closely and think it warrants further research.

After much thinking, here are my take-aways from today:

1) My first reaction to the earnings release was surprise at the size of impairments taken in the quarter. A large part of my analysis was based on the assertion that the company had previously taken aggressive write-downs on its receivable portfolios, (in particular the portion accounted for using the interest method). I based this on an estimate I made about the cumulative impairment as a % of purchase price that they had taken since 12/31/07, and compared this to similar estimates for Asta’s competitors.

Nevertheless, in the 4^th quarter, Asta took impairments of $137 million, including $74 million on the interest method portfolio – which represented 46.2% of the starting carrying balance on the interest method portfolio.

So I look a quite foolish now after putting together a “conservative” balance sheet just 10 days ago showing the interest portfolio receivables impaired 25% from their 6/30/09 levels, only to see that impairment nearly doubled in the next quarter.

Because it is such an important piece of the puzzle, I will show my estimate in detail (this is a compilation of information provided in the 10-K and 10-Q filings, all numbers are in thousands).

Beginning near the top right corner, the balance of $509,580 is the actual reported carrying balance at the beginning of 2008 Q2 (Dec 31, 2007). This is the first quarter where significant impairments were taken related to the recent economic turmoil. For each quarter, the rows show the changes in the carrying balance of receivables (remember this is only those receivables that are measured using the interest method – click here for a nice explanation of this accounting treatment).

In the actual filings, the company also includes a row for impairments. To analyze the cumulative impairments at Asta, I have removed this row to calculate what the carrying value would be WITHOUT impairments, and compared this to the actual carrying value. So as you move to the left after 2008 Q2, the top row is the balance WITHOUT impairments, not the actual carrying value.

I HAVE included $30.3 million of impairments that were taken on the “Palisades Portfolio” in Q2 2008 because in Q3 2008 this portfolio was transferred at its then-current carrying value (after the $30.3 impairment) to the cost recovery method of accounting. Since the portfolio was taken out of the interest method pool, the impairments need to go with it.

At the bottom of my table I also list the actual carrying value of the assets accounted for under the interest method. By comparing this with my estimate of the non-impaired carrying value, I was able to estimate that as of Q3 2009, these assets had been impaired ~33.6%.

The Q4 2009 data hasn’t been entirely released (the detail will be in the 10-K due out shortly), but as noted above, we do know that the interest method portfolio was impaired $74 million, and I am able to estimate the ending carrying balance of the portfolio within a few million at $69,837, representing a cumulative impairment since 12/31/07 of over 65% of the purchase price.

By way of comparison, Asta has some similar, publicly traded competitors. I looked at two of its peer companies (as noted by Asta in the 10-k) – Encore Capital Group and Asset Acceptance Capital Corp. Both companies provide more detail than Asta on impairments – explicitly showing cumulative impairments as a % of purchase price by vintage year. This is very helpful because while Asta has not purchased significant new portfolios since the credit crisis began and therefore substantially all of its assets are likely candidates for impairment (purchased at older, higher prices), both Encore and Asset Acceptance have continued to make purchases. Presumably these new purchases are at lower prices and not likely to be impaired – so it is helpful to be able to focus on just the assets that were purchased pre-crisis.

Encore Capital has taken cumulative impairments of 11.8% and 11.3% of purchase price on its portfolios purchased in 2005 and 2006, respectively. Asset Acceptance has taken cumulative impairments of 23.4% and 27.5% on its portfolios purchased 2005 and2006, respectively. This would suggest Asta has been more aggressive on impairments, as my estimates are 33.6% as of 6/30/09 and 65.4% as of 9/30/09.

At 65.4% impairment, it seems unlikely the assets are STILL being carried above fair value. However, I would have said the same thing about last quarter’s numbers. So in light of my previous post, I feel a bit like Kramer on the episode of Seinfeld where he takes a vow of silence…. “starting NOW.”

In Summary on Impairments

- I feel more confident than before that the stated book value is conservative

- I feel far less precise on my understanding of the fair value of the assets

- The company is generating an estimated $46 million tax refund in 2010 by taking these impairments. To the extent that management is choosing real cash benefits over reporting better earnings and hence adding value, I applaud them.

- I plan to spend more time digging to see if I can get a better comfort level on the appropriate fair value

2) My second take-away from today is how well the stock performed today relative to news that book value was reduced by 25%. The stock opened down approximately 15% and then traded up most of the day. Take a look at the stock chart, which explains it better than I can here.

I would like to think a large factor in this was the seemingly large margin of safety going into yesterday. Having that margin of safety leaves room for error of analysis (in my case on the impairments), bad luck (wish I could blame this), or deteriorating conditions.

I am sure the large tax refund also played a role.

3) The company once again reporting strong cash flows from interest method portfolios that are fully amortized ($9.6 million for the quarter). This income for 2007, 2008, and 2009 has been $23.9, 45.3, and 40,7 million, respectively. As I discussed in part 1, I think this is a key component of overlooked value at the company. I asked Bob Michel (CFO) about this today and in particular if the company could offer any visibility on the extent that this might continue. He wouldn’t provide any guidance, although he did say he expected it to decrease, although not to zero.

I wonder if this is simply a by-product of a company that is aggressive with impairments. Over the next few weeks I am going to see what I can dig up as far as comparing these cash flows to similar companies, and estimating future cash flows from these fully amortized portfolios going forward.

4) I am NOT making any specific buy/sell/hold calls yet, but will definitely be watching and analyzing in the weeks to come.

5) There is a lot more to talk about – the fact that Asta has completed paid off its credit facility, freeing up cash flow and removing some restrictive covenants on share repurchases and portfolio acquisitions (although no promises on either of these going forward). Also, Asta has estimated cash flows of $80-85 million from operating and investing activities for 2010 so I’d like to play out where that will go… More to come!

BTW I love feedback, questions, and criticisms if you have them.

Asta Funding, Inc is in the business of acquiring, managing, servicing, and recovering portfolios of consumer receivables, including credit card, auto deficiency, and telecom receivables. The company purchases receivables at steep discounts from the face values of the underlying claims (3.4-4.0% of face value over 2004-2008). Typically the receivables have been previously written off by the originator and collections have previously been attempted by one or more parties.

I first found this company from a yahoo finance screen designed to find companies trading below net net working capital.

The industry has been strongly affected by the economic downturn. Many of the recoveries come from court settlements including wage garnishing or property sales. With employment and property trends of late, these recoveries have suffered significantly.

One view of ASTA Funding is a simply a pool of assets. From this perspective, I believe a good estimate to the value of ASTA Funding could be determined as:

Fair value of stockholders’ equity + Hidden Value (discussed below)

Fair Value of Stockholders’ Equity

ASTA Funding is current trading in the market at a P/B of 0.49. Understandably, the market has taken a skeptical look at a company with such exposure to the recessionary environment. However, after digging into the company’s balance sheet and under conservative assumptions that I will outline below, I believe the common stock of ASTA Funding is significantly undervalued.

As the figure below shows, the stock has historically traded most of the last six years at P/B ratios between 1.8 – 3.0.

Of course one of the key questions is how the carrying value of the company’s assets compare to the fair value. The value of consumer receivable pools has taken a dramatic hit over the past couple of years, so let’s take a closer look.

The company’s assets

Substantially all of the company’s assets are its portfolios of consumer receivables. When these portfolios are acquired, they are pooled into “static” loan portfolios for reporting purposes. The company then accounts for its receivable portfolios under one of two different accounting regimes.

a) The interest method

Under the interest method, projections are made at the acquisition as to the timing and size of future cash flows. These projections are discounted back to the purchase price to determine a benchmark IRR for the pool.

As cash is received, it is recognized as income and principal as it would be for an ordinary, fully-amortizing loan. Cash flow estimates are reassessed quarterly. These projections are then discounted at the previously established IRR and impairments are recognized to the extent that the present value of the expected cash flows fail to meet the carrying value of the assets. Conversely, the cash flow estimates cannot increase the carrying value – instead, the benchmark IRR is revised up and used to value the portfolio going forward. This has the effect of recognizing more income going forward, but the carrying value is not revised upwards. So long as the cash flow projections are reasonable, this interest method results in economically meaningful reporting, with the carrying value always equal to the present value of the expected future cash flows. For a more detailed description, google AICPA Statement of Position 03-3.

The downside of the interest method is that is relies heavily on assumptions that are made by the company. Economic uncertainty or poor assumptions can distort carrying values. Worse, it allows plenty of room for executives who are incentivized by compensation tied to income, or bank covenants requiring certain interest coverage, to manipulate the assumptions leading to inflated asset values.

b) The cost recovery method

Under the cost recovery method, all cash flow from the consumer receivables is first applied to principal. Only after the principal carrying value is reduced to zero are cash flows recognized as income.

Generally speaking, the cost method is an overly conservative accounting treatment. Because all proceeds are applied first to principal, the carrying value of the asset will become understated and the income will be inappropriately deferred. (An exception of this is that it could be used to hide further impairments).

The company currently uses both method of accounting. As of 6/30/09, 38.3% of the company’s assets were accounted for using the interest method and the other 61.7% were accounted for under the cost recovery method.

Impairments

Like all credit instruments, the value of consumer receivable portfolios has decreased significantly during the credit crunch.

Each quarter, the company separates its portfolio into interest method and cost recovery method, and reports certain statistics including: beginning balance, new acquisitions, sales, cash collections, finance income recognized, impairments, and amount transferred from interest method to cost recovery method.

Although there is not enough detail for a precise calculation, by tracking the cumulative impairments starting with the quarter ending 12/31/07, and adjusting for $30.3 million of impairments that were taken on the Palisades Portfolio (see below) before it was transferred to the cost recovery method, I have estimated that the carrying value of the current interest method portfolio would be $205,508,000 had no impairments been taken. By comparing this to the actual carrying value ($136,440,000), I estimate that assets in the interest method pool have been impaired 33.6% between 12/31/07 and 6/30/09.

“The Palisades Portfolio”

In March 2007, the company acquired its largest ever portfolio of receivables for a purchase price of $300MM. For the purposes of this report, I will refer to this portfolio as the Palisades Portfolio. To finance the purchase, the company used $75MM from its line of credit and obtained a $227MM loan from the Bank of Montreal. The company formed a wholly-owned subsidiary, “Palisades XVI” to own and manage the collections of this portfolio. The Bank of Montreal loan was initially only full recourse to the Palisades XVI subsidiary; however, the loan has been amended several times and now includes a limited recourse guarantee of up to $8MM from Asta Funding, Inc.

Initially, the Palisades Portfolio was accounted for using the interest method. The portfolio has not performed well. An impairment charge of $30.3 million was taken against it in FY 2008. Further, the company moved the portfolio from the interest method to the cost recovery method in the quarter ended June 30, 2008, citing an inability to develop “a reasonable expectation as to both the timing and amount of cash flows.

As of the most recent reporting date, 6/30/09, the company reported the following balance sheet items:

ASSETS

Cash and equivalents                             3,223
Restricted cash                                         2,256
Receivables portfolios
- Interest method                               136,440
- “The Palisades Portfolio”               181,400
- Other cost recovery method         38,424
Other assets                                             30,423

Total Assets                                           392,166

LIABILITIES

Debt
- Line of credit                                        35,488
- Bank of Montreal                             109,400
- Subordinated debt                               8,246
Other liabilities                                        2,622
Total liabilities                                    155,756

STOCKHOLDERS’ EQUITY              236,410

Shares outstanding, 6/30/09        14,272
Book Value per Share                        $16.56
P/B                                                                  0.49

Because it represents almost half of the company’s total assets, the valuation of the Palisades Portfolio is of obvious importance. On the company’s May 11, 2009 conference call, CEO Gary Stern described the exposure of the Palisades Portfolio. According to Stern at the time of the call, the “doomsday” scenario is that the Bank of Montreal takes back the portfolio, in which case the company would recognize a loss on the portfolio that would allow it to receive $30 million back from the federal government for taxes paid on income recognized on this portfolio while it was still being accounted for under the interest method.

Hidden Value

Under the interest method of accounting, a portfolio can become fully amortized and still be generating cash flow. While the collections are recognized fully as income, there is no corresponding asset on the balance sheet.

Asta Funding has collected between $10.2 million and $12.2 million in EACH of the last seven quarters from fully amortized loan portfolios. In addition, the company collected $23.9 million from completely amortized loan pools for the preceding fiscal year. This is VERY material for a company with a total market capitalization of only $96.5 million (as of 11/30/09).

To the extent future collections are likely, there is tangible hidden value to these loan portfolios. Unfortunately, it is difficult to have visibility on this. To be conservative I have limited the valuation of this hidden asset to 1x trailing earnings ($42.9 million).

Adjusted Balance Sheet

The following is a conservative version of the balance sheet. I have made the following adjustments to the actual reported balance sheet:

1)      On my balance sheet, the Bank of Montreal forecloses on the Palisades Portfolio. Asta Funding has an $8MM exposure to a limited guarantee to Bank of Montreal that I have included in “other liabilities.” “Restricted cash” is cash that Palisades XVI is currently holding for payment to the Bank of Montreal loan the following month, so in a foreclosure that would be applied to the Bank of Montreal loan.

2)      As noted above, I estimate the company has already impaired the assets in the interest method pools by 33.6%. To add an additional margin of safety, I have reduced the carrying value of these assets by an additional 25%. This implies that the value of these assets has fallen in half since 12/31/07.

3)      I have reduced the carrying value of the Cost Recovery Method assets (excluding the Palisades Portfolio) by 50%.

4)      I have added a “Hidden value asset,” valued at 42.9 million, which is equal to 1x earnings over the previous 4 quarters from fully-amortized loan portfolios.

ASSETS

Cash and equivalents                              3,223
Receivables portfolios
- Interest method                               102,330
- Cost recovery method                      19,212
- Hidden value asset                            42,900
Income tax rebate receivable        30,000
Other assets                                             30,423

Total Assets                                          228,088

LIABILITIES

Debt
- Line of credit                                        35,488
- Subordinated debt                               8,246
Other liabilities                                      10,622
Total liabilities                                       54,356

STOCKHOLDERS’ EQUITY              173,732

Shares outstanding, 6/30/09         14,272

Book Value per Share                         $12.17

P/B                                                                  0.67

So the Price/Book value under this scenario would still be 0.67.

The mean return during the period 7/17/09 to 11/10/09 was 28.3%, compared with a return on the S&P 500 of 16.2% for the same period. Since all of the stocks in the NNWC list have small market caps, I have also included the return on the S&P Smallcap 600 (12.6%).

More interesting is the variance of the individual stock returns about the mean.

The blue dots show the returns on the individual stocks from the NNWC list compared to the S&P 500 (red line). Notice how many of the returns are clustered near the S&P 500 line but that there are several outliers to the positive side.

Over the next several weeks I am going to look more closely at some of the individual stocks – both the ones that have done very well and those that are still trading below NNWC/share – to see if we can find some interesting opportunities.

On Valuation

Valuation: Measuring and Managing the Value of Companies Koller, Goedhart, and Wessels

Security Analysis Graham & Dodd

Margin of Safety Klarman. (Out of print. I found a copy in the Boston Public Library financial branch – you aren’t allowed to take it out and you have to leave your driver’s license at the front desk to read it!)

Investment Valuation Damodaran

Fooling Some of the People All of the Time Einhorn

Hedge Hunters Burton

Miscellaneous

Fooled by Randomness Taleb

The Black Swan Taleb

Influence Cialdini

**Disclaimer – this is meant to be an article about a conceptual treatment of risk. Don’t be fooled by the graphs, there is nothing precise in my discussion.

I’m going to start with a simple claim that the price movements of a stock can be broken down to two components:

1) Real Changes in the Economic Drivers. By this I mean changes in interest rates, inflation, the business cycle, the industry, the competitive position and actual developments at the individual firm etc.

This is obviously a complex issue that varies from industry to industry and from firm to firm. For simplicity, we will model this type of risk as normally distributed around an expected return (similar to the CAPM).

2) Changes in Investors’ Perceptions of Firm Value.

In the short-term, stock prices can make volatile moves seemingly detached from underlying value. The internet bubble, the housing bubble, and the market movements at the end of 2008 are poignant examples.

However, in the long-term, changes in investors’ perceptions of firm value tend to converge to underlying fundamental value. This isn’t just a theory, there are several mechanisms in the market that encourage this, including: dividends, share buybacks, corporate acquisitions, spin offs/liquidations, and other investors searching for bargains.

Example A: Stock Price Determined Solely by Economic Drivers

This is what the returns on a stock might look like if they were only determined by changes in the overall market (what I’m calling changes in Economic Drivers). In other words, it is assumed that the stock is fairly valued and that its annual return is symmetric about the expected return – as determined by the growth rate of the economy and the riskiness of the stock.

Strange as it seems, this is similar to the treatment of risk of many relative performance funds.

Example B: Stock Price in One Year Fluctuates Around Fair Value

This example assumes the stock begins the year undervalued by 25% and that its price ends the year symetrically distributed around the fair value. If this were the reality of how stock prices fluctuated, this is what the returns might look like for this stock.

Example C: Stock Returns Are a Combination of Randomly Changing Economic Drivers and Convergence to Fair Value

This third example assumes that both the force of random (or at least difficult to predict) underlying economic forces and a tendency to converge to fair value drive the price of stocks. To generate this chart, I assumed the returns are 50% driven by each factor. Again, in no way am I claiming this is an accurate representation of actual returns, just a conceptual view of how different forces contribute to stock returns.

The blue line below shows the returns for a 25% undervalued stock whose return is driven in this manner.

So What Does Any Of This Mean?

Unfortunately you never get to see the probability distribution of your stock returns a year in advance. However, my personal investment thesis, and the subject of this blog, is that Value Investing - the systematic purchasing of securities that are fundamentally undervalued and the systematic selling of securities that are fundamentally overvalued - will uncover far more investment opportunities that resemble the blue line in Example C. And that by consistently applying these principals of investment strategy, a diligent investor can achieve higher returns with at lower risks.

But let’s do a quick thought experiment to see how ridiculous this is….

Is investing in the stock of a small biotech company with only one drug under develoment risky?

Not enough information, right?

Now let’s pretend the company’s drug has a 50% chance of total failure, in which case the stock will go to zero in 1 year, and a 50% chance of success, in which case the stock will go to $100 in 1 year.

Now is the stock of this biotech company a risky investment??

In the framework of betas, this simplified stock would be determined a very risky investment with huge volatility.

However, look at how dramatically the risk characteristics of the investment vary depending on the purchase price (“stock price today”).

In each scenario, you own the same company with the same 50% chance that the stock is worth $0 in 1 year and 50% chance that it is worth $100 in 1 year. In each scenario this translates to a 50% chance of losing your entire investment, but dramatically different possible returns on the upside.

This is obviously a grossly oversimplified example but it has a clear implication – price must be considered when discussing the risk of owning a stock!

However, with the precipitous decline of stock markets at the end of 2008 many of these opportunities have reemerged, and it is worth taking a look at this strategy.

The basic premise is that net-net working capital should be a conservative estimate of liquidation value, because it ascribes zero value to fixed assets, while giving full value to all liabilities (on the balance sheet).

There are a few things to watch out for:

1) NNWC of a rapidly deteriorating business can quickly fall so that the stock price may not be bargain - this problem is compounded the more time elapses between the reporting date for the balance sheet and the date you are looking at the share price.

2) The company could have significant off-balance sheet liabilities such as contingent liabilities, underfunded pension plans, or pending legal settlements.

3) The book value of the current assets could overstate the true value of the assets. For example, current assets could include obsolete inventory or doubtful accounts receivable that haven’t been written down to fair values.

4) Everything from outright fraud to specific situations such as the stock is trading ex-dividend.

That being said, I still like NNWC because you can run some relatively easy screens and find a pool of interesting securities worthy of investigating further. The table below is the result of a screen I performed on the Yahoo Finance stock screener on July 17, 2009. I don’t remember the exact screen criteria, but I started with a combination of a low P/B, high cash per share, and then went through balance sheet data on a stock by stock basis to calculate NNWC/share.

A couple of quick notes on this:

1) In addition to NNWC I have calculated Net Cash Per Share (cash & equiv – total liabilities per share), an even more conservative measure of liquidation value.

2) I have calculated the “ROI back to NNWC” and the “ROI back to Net Cash.” The percentage itself isn’t meant to be any indication of the return likely on that investment, but rather a way to measure how far below these valuation estimates the stock is trading. Remember, no one is claiming that NNWC or Net Cash per share is the FAIR value, just that it is likely to be a conservative estimate of value.

I will be coming back to this table in a few posts to look at some of the more interesting stocks in more detail.