Triad Share Discussion Threads

[cjohn] 29/6/2020 11:00

Ok, thanks Arthur, I appreciate your initiative.

Back to TRD here!

[dangersimpson2] 29/6/2020 09:43

Thanks CJohn, I hadn't clocked the 2/3rds of NCAV as an alternative. I think I prefer the original since it is slightly more nuanced but at this level of cheapness we are splitting hairs!

Good idea on the new thread, we probably should get back to TRD here...although we have long waits between results and I am assuming no in-person AGM this year to meet management, so might not have much to discuss!!

[joerog] 28/6/2020 15:44

Thanks net curtains

[joerog] 28/6/2020 15:35

It might be me being stupid, but how do I find the new board please as I am interested in it?ThanksJoe

[arthur_lame_stocks] 28/6/2020 13:27

CJohn

I have just set up a thread under the ticker VALUE. Feel free to post about value shares on there. Hopefully we can keep the discussion civil and relevant.

I will post about a few of the stocks I have bought during the sell off to start things off.

[arthur_lame_stocks] 28/6/2020 13:20

CJohn

I can set up a new thread if you like to discuss value shares. I would rather it wasn't too strict about what was a value share, so mainly things that are either trading at a substantial discount to NAV, have low debt or net cash or are just cheap on earnings.

As you say we aren't going to find many worthwhile net nets in the UK.

[cjohn] 28/6/2020 12:09

In reality, though Graham was looking at liquidation value when he originally came up with the idea of net-net stocks, he - and other early value investors - later realised that these apparent "cigar butt" stocks, in fact, only had a vary small level of involuntary (and voluntary) failure. (That's not so surprising considering their financial strength.)


Net-net investing has long since branched out from its liquidation roots. It's perfectly possible to find very strong businesses trading at 0.66 NCAV, but you have to go outside the UK, which is comparatively a net-net desert.

[cjohn] 28/6/2020 12:02

dangersimpson2
28 Jun '20 - 11:56 - 1720 of 1721
0 0 0
In Graham terms WGB would not be a net net buy at any price because the majority of its value is in recievables and inventory which Graham discounted:

Net-net working capital is calculated as cash and short-term investments + (75% of accounts receivable) + (50% of inventory) - total liabilities.




Hi dangersimpson, I remind you of my earlier posting: Graham constantly re-formulated his ideas: an alternative formulation for net-nets is: NCAV = net current assets minus all other liabilities. A net net stock is any stock trading at 0.66 NCAV or below. This formulation is more widely used.

WGB is not a net-net on either formulation.

[dangersimpson2] 28/6/2020 11:56

In Graham terms WGB would not be a net net buy at any price because the majority of its value is in recievables and inventory which Graham discounted:

Net-net working capital is calculated as cash and short-term investments + (75% of accounts receivable) + (50% of inventory) - total liabilities.



With its higher proportion of current assets as cash, Triad scores more highly on this metric, although the Graham Net Net is still only c12p per share.

WGB trades on a bigger discount to NTAV than TRD at 0.71 vs 0.97. The question investors should be asking is how valuable are those tangible assets, and as Arthur_Lame_Stocks points out intangible assets may have significant value too.

Trading at a discount to TBV definitely does not mean that the company could be liquidated and you would receive your investment back. In a liquidation, the assets rarely receive full value, and there will be big admin & insurance costs that will eat most of the value.

With a Graham net net you stand a greater chance of getting your money back in liquidation since the current assets have already been discounted in the analysis, but again it is not a given.

As I point out in my online seminar on the topic,( ) the real returns become because the power of capitalism forces companies with unproductive assets to make them more productive by returning cash, selling assets or shutting down unprofitable business lines. ROCE is one of the most mean-reverting series, which is why this type of deep value investing works.

[cjohn] 28/6/2020 11:44

netcurtains
27 Jun '20 - 13:37 - 1712 of 1718
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Yes motely fool emailed today explaining why NET NET stocks are incredibly high risk (eg they tend to get this way because the poorly managed and going down fast)

Where COVID comes in though, it gives us a window to buy relatively well managed stocks hit by COVID really cheaply. Japan might not be the best place for those stocks - I'd say the UK is a good place for COVID hit NET NET stocks.


Hi Net,

Nearly all net-net stocks in the UK are either junior exploration stocks or bio-tech stocks. They fall into the net-net category because they have large piles of cash. But this cash is to be used up to search for oil/gas etc or a therapeutic molecule. They will not remain net-nets for long. So not recommendable on Grahamite grounds.

Otherwise, NTQ and WYN were briefly net-net stocks recently. I have stakes in both.

However, I can only assume you have no knowledge of Japan. Japan is far superior to UK for net-net investors. Not only are there several scores of such stocks currently; they are trading at much deeper discounts and they are in businesses of much higher quality and market cap. Such shares have been equally as beaten down by COVID as their few UK equivalents; yet COVID has been much less of an issue (much better handled by government) than in the UK.

[cjohn] 28/6/2020 11:30

Walker Greenbank is a very interesting share. But it is not a net net.

It's trading at a price around net current assets. Then you have to subtract a small amount of long-term debt and some long-term pension obligations.

To be a net-net in Grahamite terms, it's got to be trading at 2/3rds NCAV.

[netcurtains] 28/6/2020 09:54

WGB after tax net profits over past 5 years:

2015 £5.11m
2016 £5.87m
2017 £5.37m
2018 £11.75m
2019 £5.10m

market cap now £25m (or 5 times annual normal profits)
If you add in that NAV per share is higher than price per share
then providing you can take this years bad data its a long
term bargain - and you get 3.5% yield (roughly).
There is also a vague possibility (somewhere down the line)
of making 2018 scale profits - perhaps via SE Asian market.

[arthur_lame_stocks] 27/6/2020 19:26

The other thing with Walker Greenbank is there is substantial value in the intangibles such as the design archive as is proven by the licencing income they have been receiving in recent years.

I expect them to struggle for some time but hopefully the balance sheet is strong enough that they don't need to raise funds and if they can return to historic levels of profitability they will look dirt cheap at current prices.

[joerog] 27/6/2020 18:29

Netcurtains: any that you are looking at/ in now in the uk?

[paleales] 27/6/2020 14:34

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[netcurtains] 27/6/2020 13:37

Yes motely fool emailed today explaining why NET NET stocks are incredibly high risk (eg they tend to get this way because the poorly managed and going down fast)

Where COVID comes in though, it gives us a window to buy relatively well managed stocks hit by COVID really cheaply. Japan might not be the best place for those stocks - I'd say the UK is a good place for COVID hit NET NET stocks.

[joerog] 27/6/2020 12:44

Any that can be traded on HL? I know the German and Canadian shares can but outside Europe and the US/ Canada they don't have many options; certainly none in Asia. I am in a number of shares which I hope are undervalued but also high risk: PHSC, TCN, SIM, PPIX, TRD and just some collective trackers to have some balance.

[cjohn] 27/6/2020 10:09

Nearly all my buys fall into the category of deep value shares: i.e. shares that are trading at a significant discount to tangible asset value. (I was aware of SIM for that reason.) A significant percentage are in companies not trading on a UK market - Japan, Canada, US, Germany, Poland in order of monetary value.


Yourself?

[joerog] 26/6/2020 13:25

Thanks John. I was aware of that but not to that detail. Which shares are you interested in?

[cjohn] 26/6/2020 10:04

Hi joerog,

regarding the governance issues, take a read through the SIM thread for a better account than I can give.

[joerog] 25/6/2020 16:15

Thanks cjohn. What do you mean? The ongoing litigation?Yeah, I saw that about the acquisition team and thought it was a bit strange to publish that - why would they need to?

[cjohn] 24/6/2020 17:59

BTW joerog, I took a closer look at SIM. There are some significant governance issues...…

Also, they've set up an acquisition group and are going to try to acquire their way to scale in the simulator industry.