Net/Nets, Liquidations and Special Situations
I have a large library on special situation investing and eventually all will be posted or in the value vault. However………
The near-term focus of this blog will be strategic logic and valuation, but I want investors who are starting their journey to have access to resources for asset-based (non-franchise) investing.
You can learn how to invest just as if you were analyzing a company. Start with the balance sheet and work down from simple to complex. Cash is a more solid asset than a tax asset, for example.
But as you read the following resources always be thinking as a business person. Ask what is the economic reality of this asset or liability.
QUIZ
Can YOU name a fixed asset on a balance sheet that really is economically the same as a current asset, almost as liquid as cash? Conversely, can you name a situation where a current asset is less liquid than a typical fixed asset? Hint: Marty Whitman of Third Avenue Value Fund has preached this lesson often. (see links below).
Please take no more than 20 seconds to answer the first question. Prize: A tip from Jim Cramer on CNBC. C’mon, you can’t expect to win much on such a simple quiz!
–
This document has several excerpts from Graham, Klarman and Whitman on liquidation values. A good primer on liquidation analysis.
If you are going to pursue asset-based investing then you need to study Marty Whitman. Read his first book (not a breezy read, though)
And his shareholder letters: http://www.thirdavenuefunds.com/ta/shareholder-letters-mf.asp
If you are a shareholder or a student you can call his office and ask for his book of shareholder letters: 1990 to 2005. Highly recommended.
Marty Whitman on value and corporate governance
You can learn from blogs that focus on this type of investing.
My favorites: www.greenbackd.com (excellent. If you read all his posts and analyze past investment ideas you will have a solid grounding in net/nets.)
For podcasts on investing and net/nets from a self-taught investor: www.gannononinvesting.com
Also: http://www.manualofideas.com/blog/
http://www.rationalwalk.com/?p=2472
http://can-turtles-fly.blogspot.com/
Another good overall resource:
http://www.burgundyasset.com/index.asp?Main=FAMinst&Section=Library&SubSection=View&View=normal
–
A reader kindly offered to share his resources here: http://motiwalacapital.com/blog/
And he suggested viewing these videos and materials: http://www.bengrahaminvesting.ca/resources/videos.htm-
You are on your way………….
I thought you said a TRIP from Jim Cramer.
I’ll keep mum on the answer, because the Whitman clue gives it away.
This is a non-profit blog so TIP not TRIP from James Cramer. Yes, in your email, you got the answer. A+
HI, I think this doc is not set to public yet…
http://www.scribd.com/doc/74686353/Special-Situation-Net-Nets-and-Asset-Based-Investing-by-Ben-Graham-and-Others
Thanks Peter:
For catching that. I set the document to PUBLIC on http://www.scribd.com.
You can read or download the word file.
Thanks
Since no one posted a comment yesterday. My guess is that there are more than one of each, but in 20 seconds.
-An example of a fixed asset that is more economically like a current asset is proved oil reserves.
-An example of a current asset that is less liqudid that a fixed asset is inventory from a clothing company whose fashion has fallen out of style.
Yes, you have the answers. You could have top tier real estate–say, a building on 200 Park Avenue in NYC (fromerly PanAm building then the MetLife building) which can sell with a phone call and perhaps a few days at most. Oil Tankers are fixed assets on the balance sheet but trade like pork bellies on a shipping exchange.
The point is to think in economic reality not just in accounting terms.
You are the winner. Jim Cramer tip: Buy Groupon after it doubles.