• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing

The Dearth of Available, Investable Net/Nets

I lament the fact that one of my favorite deep value hunting grounds is nearly devoid of possibilities.
By JONATHAN HELLER
Mar 16, 2018 | 12:00 PM EDT
Stocks quotes in this article: SHOS, HD, LOW, RAIL, RELL, CVU

I'm a bit nostalgic today as I ponder the dearth of available and investable net/nets (stocks trading below net current asset value). The rising tide of the markets has lifted nearly all boats (with some exceptions, including specialty retail), and I lament the fact that one of my favorite deep value hunting grounds is nearly devoid of possibilities. The difficult part is that I believe that the investment technique is still capable of revealing potential winners.

Last April, conditions were just slightly better in net/net land. At the time, I did not think the cupboards could be more barren, but I was wrong. At that time, there were indeed a handful of interesting possibilities, all of which I purchased sometime along the way, and still own to this day. There was yet another name that may have looked interesting on paper in some respects, but was a proverbial toxic value trap that I recommended avoiding.

That value trap, Sears Hometown and Outlet Stores (SHOS) , has since fallen 40%, as conditions have worsened, revenues have continued to decline, and the company has fallen deeper into the red. Still a net/net, and trading at just .3 X net current asset value (current assets less total liabilities), I don't see how the company survives in an ever-increasingly competitive environment where Home Depot (HD) and Lowe's (LOW) nearly own the appliance space.

Things were a bit brighter for FreightCar America (RAIL) (+15%), although this one has been a bit of a disappointment, putting up some worse than expected earnings numbers the past couple of quarters, and eliminating its dividend in the fall. Still, the balance sheet remains solid, and RAIL ended its latest quarter with $131 million, or $10.63 per share in cash and marketable securities, and no debt. The company is attempting to turn itself around operationally, and has a seemingly long runway to do so, given its financial position. RAIL currently trades at 1.33 X net current asset value.

Richardson Electronics (RELL) (+40%) finally put up a profitable quarter in January, and the stock breached the $8 level for the first time since 2015. Still a net/net, RELL now trades for .97 X net current asset value. And it has $58.6 million or $4.50 per share in cash and short-term investments. We'll learn in April whether the company can run its consecutive quarterly profit streak to two.

Finally, CPI Aerostructures (CVU) (+27%) also put up some better than expected quarterly results, and has been the beneficiary of some new contracts. Earnings estimates for 2018 put the forward price earnings ratio at 11, and the company now trades at 1.08 X net current asset value.

Ah, the good old days, when you could still find a few actionable net/nets.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jonathan Heller was Long RAIL, RELL, CVU.

TAGS: Investing | U.S. Equity | Markets | Stocks

More from Investing

Updating Qualcomm's Break to the Downside

Bruce Kamich
Feb 24, 2021 1:05 PM EST

How do the charts look now?

Luminar Technologies Is Likely to Give Back All of its Gains

Bruce Kamich
Feb 24, 2021 12:28 PM EST

Let's look at the charts and indicators.

I Don't Want to Get Cornered Into Square

Stephen Guilfoyle
Feb 24, 2021 11:48 AM EST

Here's why the company's move with bitcoin just doesn't square well with my investing views.

Stock Picking Loses Some Energy as Interest Rates Surge

James "Rev Shark" DePorre
Feb 24, 2021 11:36 AM EST

The frenzy in certain sectors, such as bitcoin-related names, isn't as hot as last week but there is still a good amount of trading.

CrowdStrike Traders Should Take the Money and Run

Bruce Kamich
Feb 24, 2021 11:17 AM EST

CRWD has turned to the downside.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 08:36 AM EST GARY BERMAN

    Wednesday Morning Fibocall for 2/24/2021

    SPX (Long-Term View) The 2/16 HIGH @ 3950.43 is ...
  • 08:30 AM EST GARY BERMAN

    Tuesday Morning Fibocall for 2/23/2021

    SPX (Long-Term View) The 2/16 HIGH @ 3950.43 is ...
  • 04:52 PM EST CAROLYN BORODEN

    WMT Updated

    View Chart » View in New Window » Since we vio...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2021 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login