The Intelligent Investor - The Definitive Book On Value Investing

found in the Stock Guideat the end of 1968. But the picture changed in

the 1970 decline, and at the low prices of that year a goodly number

of common stocks could have been bought at below their working-

capital value. It always seemed, and still seems, ridiculously simple

to say that if one can acquire a diversified group of common stocks at

a price less than the applicable net current assets alone—after deduct-

ing all prior claims, and counting as zerothe fixed and other assets—

the results should be quite satisfactory. They were so, in our

experience, for more than 30 years—say, between 1923 and 1957—

excluding a time of real trial in 1930–1932.

Has this approach any relevance at the beginning of 1971? Our

answer would be a qualified “yes.” A quick runover of the Stock

Guidewould have uncovered some 50 or more issues that appeared

to be obtainable at or below net-current-asset value. As might be

expected a good many of these had been doing badly in the diffi-

cult year 1970. If we eliminated those which had reported net

losses in the last 12-month period we would be still left with

enough issues to make up a diversified list.

We have included in Table 15-2 some data on five issues that

sold at less than their working-capital value* at their lowprices of

Stock Selection for the Enterprising Investor 391

TABLE 15-2 Stocks of Prominent Companies Selling at or Below
Net-Current-Asset Value in 1970

Cone Mills 13 $18 $39.3 $1.51 $1.00 411 ⁄ 2
Jantzen Inc. 111 ⁄ 8 12 16.3 1.27 .60 37
National Presto 211 ⁄ 2 27 31.7 6.15 1.00 45
Parker Pen 91 ⁄ 4 91 ⁄ 2 16.6 1.62 .60 311 ⁄ 4
West Point
Pepperell 161 ⁄ 4 201 ⁄ 2 39.4 1.82 1.50 64

Company

1970

Price

Net-Current-

Asset Value

Per Share

Book

Value

Per Share

Earned

Per Share,

1970

Current

Dividend

High Price

Before

1970

* Technically, the working-capital value of a stock is the current assets per

share, minus the current liabilities per share, divided by the number of

shares outstanding. Here, however, Graham means “networking-capital

value,” or the per-share value of current assets minus totalliabilities.