Yesterday CrossingWallSteet linked an interview with Irving Kahn, a 106 year old founder of the Kahn Brothers. On web site it states.
"NET WORKING CAPITAL DISCOUNTS are stocks selling below net working capital per share after subtracting all long-term liabilities. In other words, if you subtract all current liabilities from all current assets, then further subtract all long-term liabilities and, finally, divide the remaining figure by the number of shares outstanding, you derive the net working capital per share. If a stock sells for less than this figure, you have an attractive price that always warrants a thorough investigation."
So I ran this formula on our buy-list.
Date 1/7/12 | |||||
Ticker | Price | Outstanding Shares(m) | Current Assets (TH) | Total Liabilities(TH) | Net Working Cap/S |
AFL | $44.24 | 466.790 | $2,782,000.00 | $89,983,000.00 | -$186.81 |
BDX | $73.03 | 214.890 | $4,668,331.00 | $5,602,253.00 | -$4.35 |
BBBY | $59.94 | 241.250 | $4,073,838.00 | $1,714,534.00 | $9.78 |
DF | $10.56 | 187.700 | $181,612.00 | $6,457,142.00 | -$33.43 |
F | $11.71 | 3,800.000 | $48,875,000.00 | $165,360,000.00 | -$30.65 |
GE | $18.65 | 10,560.000 | $161,994,000.00 | $751,216,000.00 | -$55.80 |
HCP | $40.34 | 407.790 | $3,110,390.00 | $5,374,556.00 | -$5.55 |
INTC | $25.25 | 5,090.000 | $31,611,000.00 | $13,756,000.00 | $3.51 |
ITW | $47.79 | 483.190 | $5,968,401.00 | $6,869,027.00 | -$1.86 |
KKR | $13.40 | 223.280 | $38,081,403.00 | $37,064,664.00 | $4.55 |
KO | $68.93 | 2,270.000 | $21,579,000.00 | $41,918,000.00 | -$8.96 |
LUK | $23.89 | 244.580 | $985,590.00 | $2,393,540.00 | -$5.76 |
MKC | $50.38 | 132.280 | $1,015,900.00 | $1,966,000.00 | -$7.18 |
MO | $28.72 | 2,060.000 | $5,981,000.00 | $32,178,000.00 | -$12.72 |
NICK | $12.85 | 11.960 | $232,182.00 | $128,430.00 | $8.67 |
ORCL | $26.93 | 5,030.000 | $39,174,000.00 | $33,290,000.00 | $1.17 |
PG | $66.36 | 2,750.000 | $21,970,000.00 | $70,714,000.00 | -$17.73 |
RAVN | $66.36 | 18.100 | $128,181.00 | $46,546.00 | $4.51 |
RLI | $73.64 | 21.080 | $501,341.00 | $1,723,216.00 | -$57.96 |
SYK | $51.50 | 382.670 | $7,631,400.00 | $3,721,500.00 | $10.22 |
NICK is by far the winner of this race. This is a very difficult measure to hurdle. The idea is that the company has very few long term assets such as plant/building and goodwill, but more working capital per share than the price of the stock.