Net Nets : a Value strategy


Wow! That sounds great!

What do you use to automate the process? do you mind sharing?



My process is in five steps (I hope you have an IT background :slight_smile: ) :

1- First, you need an universe of stocks to look for. I got the list of all US stocks quoting on the New York Stock Exchange, the Nasdaq and the Amex from the excel files available here. So a first job is to import all the stocks tickers in a database.

2- Now I need a tool that will give me, for each stock, what is the latest price and the number of shares. For this, I have an engine that will, for every stock listed in (1), will connect to the Yahoo Finance API (exemple of code here and retrieve this data

3 - Now I need to calculate the net current asset value for each stock! For this, the SEC made available an API that allows you to download in a XML or JSON format, the latest financial statements of the companies. The doc is here. Ex : by calling the URL{APPKEY}, you will get the financial reports of Microsoft in a format understandable by the computer. Note that you need first to register an application key before using the API. So the third job will call this API, download all financial reports, calculate NCAV = Total Current Assets - Total Liabilities, and store this value for each stock.

4 - Now that I have the Net Current Asset Value, the program use the number of shares it got in step (2) to calculate a NCAV per share. Now it compares this value to the current of the stock. If Price < 0.67 * NCAV/Share , then it is a Net Net candidate. From the list of 11 000 stocks I got in step (1), normally around 50 are Net Net candidates.

5 - Only at this stage I have manual work : I have a list of candidates, and I have to remove “false positives” : Chinese stocks (fake accounting), Biotech stocks (usually not earning anything)… From this list of 50 candidates, I usually find 10-15 genuine net nets.

I hope this post was not too much jargon :slight_smile: At the time it took me one week to code this tool in .NET, but now the process is mainly automatic until step 5!


IB has some fancy portfolio building tools that I haven’t had a chance to look into. Any idea if you could use that to implement this strategy?


Thanks for the process.
You have nailed down and simplified it quite well, congrats! :slight_smile:

I’ve never programmed in C# but looking at the code example you provided I guess I could do some experiments. hehe (one more gig for the list) 'till then I guess Net Nets will be on hold.

Keep us updated on any new findings



Ciao all,

using Julianek ideas I’ve built a simple tool on excel and I’m starting to look for net-nets. One “hit” is ROYT on NYSE.

However, when I try to buy it on Swissquote I receive a link to the following page

It is about “investments funds not authorized in Switzerland”.

Any idea what this is?


Hi Iamaneye,

Good catch. ROYT is indeed a Net Net based on its balance sheet.
I am not using Swiss Quote so I am not familiar with this message, but @mrs_oberland experienced the same issue lately in this topic..

From what I understand, this stock is a Trust : it is more kind of a fund that a company. Perhaps this kind of structure is indeed forbidden in Switzerland.
I am not really familiar with this type of structure, but I also found something strange in their income statement :

I am wondering why, as soon as they earn a consistent revenue (their income was 257 million USD in december 2016), do they dilapidate it instantly in spendings (248 Million spending in the same period). Perhaps it is only a coincidence or a one-off event, but it would be worth checking that it is not due to the structure of the trust.


It’s not a net net - they have practically no cash or current assets. What they own is “financial interests” in oil fields, royalty contracts or some shit like that. It seems more like a plant/property/equipment item - book value reflects initial investment made, adjusted by depreciation, and bears little relationship to the real market value of these contracts which I guess is related to earnings - production volume x oil price. Oil has been going downhill and so has this stock.


Too many unknowns indeed. I passed on this one.


Ciao all,

my net-nets strategy is taking shape. I currently have 8 stocks in the portfolio (sold CRDS yesterday with a 35% gain in one trading day!). Today I have found another small tiny candidate but I’d like to have the opinon of truer mustachians than me before committing: STRI (

This one seems legit to me with good downside protection. The only “FAIL” I have in my checklist is the lack of a catalyst. What do you guys think?


You need to be holding for 6+ months to avoid exposing yourself to potential very steep capital gains taxes

That would be buy and hold an f’ing index fund, not mess with net nets and value traps. For the latter you probably want to join something like value investors club or seeking alpha


Ciao hedgehog,

holding for more than 6 months is not an option when it come to net nets. I sell when the stock hits the sell price and I pay the taxes I have to pay. Obviously net-nets investing is not my primary way of investing. I have almost 80% of my capital invested in VWRL and I’m very happy to sit back and relax with it. 10% is cash and the other 10% is dedicated to some “non-true-mustachian” activites like net nets, crypto, p2p, options trading. All of this on top on 2nd and 3rd pillar of course. I feel that this asset allocation is rather conservative and it still allows me to enjoy the EOD trading that is an old passion of mine.

I understood that this thread is dedicated to learning about the net nets strategy and that’s why I’m posting here. Rest assured that I’m also checking seeking alpha but one doesn’t exclude the other in my opinion.


Capital gains taxes, if they chose to levy them, will be on your whole portfolio. And they are very steep: your marginal income tax rate (up to 30-40%) + 10.25% AHV. Options trading as far as I see it is practically a guarantee that you’ll get shafted with CGT, so i wouldn’t recommend that. At least establish your own company to do trading on its behalf then, to eliminate tax uncertainty


“Due to, among other things, the difficulty repatriating cash to the U.S., we may have limited access to the $5.3 million of cash and $0.1 million of bank acceptance notes located in China for use outside the country.”

If you discount this chinese cash it’s not much of a net net. They also seem to have some expensive lawsuits going on. No profit in sight, yearly expenses are comparable in magnitude to cash pile. They do have some fat tax rebates coming in though which compensated losses so far, I’d look up what’s the deal with them next if buying


The tax discussion is indeed a critical one, you are right. I am aware of the five principles of the circular 36 of the tax authority. My understanding is that they are used to decide without further discussion whether you are automatically a private investor. Not complying with all five principles, however, does not (and should not, by law) automatically qualify you as a professional investor. Your case will be reviewed as a whole. Here is tricky and you are also right about the uncertainty of the law. So far, I have never been even questioned on private vs professional but I doubt that making few options trades with very small amounts (mainly selling puts to acquire the underlying at discount prices or trading covered calls to hedge the underlying position) or capitalizing a single “lucky” trade like CRDS (also with a very, very small amount of capital invested) without waiting 6 months would qualify me as a professional investor. I do admit, however, that I have never really investigated this subject in the level of detail it most certainly deserve and I will do it in the near future. Thanks for the heads up!


Yes, it’s decided on a case by case basis. But frequent trading, short term holding and options trading are considered strong indicators of professional trading. You’re taking unnecessary tax risk for inadequate returns IMHO. Try not to sell VWRL then until the end of the year at least to avoid realizing more potentially taxable gains, just in case

If you have 20k+ play money, you could’ve set up shop as a GmbH already and do the trading through it. This would eliminate the uncertainly: companies are always taxed on capital gains, and you could deduct your trading losses over years to come. You’d have some tax planning room: take earnings as dividend or salary or retain. Plus you’d probably gain invaluable first hand accounting and entrepreneurial experience managing it


maybe not at the core of net nets, fintool made a nice pot in 2015, plotting country wise stock markes in Schiller PE vs. Price-Book ratio:

some great deals available in Russia, Hungary & Austria^^
There is actually an MSCI Hungary with 3 constituents…

Good time to invest in emerging markets?

Meaningless plot as you don’t take into account rates and trashiness of each market into consideration.


I think you might be putting it a bit too succinctly. The chart certainly lacks several dimensions (e.g. political risk, other risk factors) and should thus not be relied upon as the sole guide for investments. This wasn’t intended, I assume, seeing that @nugget mentionned that the plot is well-aged (2015).

The main point that value investing brings up stands: Does it make sense to recommend start investing according to market capitalization when some of these markets are historically high priced? The answer may not be clear-cut and thus should neither be recommendations of how to set-up a portfolio.


if you horizon is long enough: yes. because: who cares.
From the practical view: almost any ETFs other than the mainstream ones from Vanguard, IShares etc come at considerable additional costs like higehr TER, spreads, tracking errors, tax inefficiencies, risk of being closed, and less diversification. The extreme example is that MSCI Hungary, made up of 3 (!) constituents.


Is overpaying for assets really the Mustachian way? MMM seems to be pretty sharp regarding what he is ready to pay for real estate, tools, etc. Often principles from real life are left outside when entering the stock market.

Jack Bogle makes the same point about valutations and the consequences for returns in the next 10 years.

Lack of returns in the starting phase do have a considerable effect. I am not sure the attitude “because: who cares.” really does justice to those advised.

This is a red herring. The discussion is not about risk, as your plot did not take it into account.