Premium Post: Insider Buying In A Net-Net

The goal of the premium version of Inside Arbitrage is to provide subscribers with a set of tools that help with their investment process. I don’t often write a premium post unless I see an interesting opportunity. Sometimes I don’t write a post for more than six weeks and at other times it can be twice in the same week. This is one of those weeks and I wanted to write this post after I noticed insider buying in a net-net. The father of value investing Benjamin Graham used to like net-nets, a group of beaten down unloved stocks that are trading below their liquidation value. The classic Benjamin Graham type net-nets are defined as companies trading below the value of their net current assets after subtracting total liabilities. In other words if you were to buy all the stock, pay off all the liabilities and convert all current assets into cash, you would end up with more cash than you paid for the whole company. As anyone that has run a business will tell you, it is nearly impossible to convert all receivables into cash or sell all the inventory at the value it is carried on the balance sheet. Some...

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