How is it possible that an issue with the splendid records of Tonopah Mining should sell at less than the company’s cash assets alone? Three explanations of this strange situation may be given. The company’s rich mines at Tonopah are known to be virtually exhausted. At the same time the strenuous efforts of the Exploration Department to develop new properties have met with but indifferent success. Finally, the drop in the price of silver last year has provided another bearish argument. It is this combination of unfavorable factors which has carried the price down from $7 1/8 in 1917 to its present low of $1 3/8 in 1923.
Granting that the operating outlook is uncertain, one must still marvel at the triumph of pessimism which refused to value the issue at even the amount of its cash and marketable investments; particularly since there is every reason to believe that the company’s holdings in the Tonopah and Goldfield railroad, are themselves intrinsically worth the present selling price. (Ben Graham on Investing)
Marty Whitman criticizes Graham and Net Nets (3 minutes Must see!)
Marty Whitman: They Just Don’t Get it. (23 minutes) Marty says many analysts on Wall Street do not understand credit analysis. We will explore later in this course whether the quality of credit provides a better assessment of the true cost of capital for a firm rather than “beta.”
One investor’s experience investing in Net/Nets (3 minutes)
Net/nets as value traps (5 minutes)
Good advice on behavioral investing (3.5 minutes)
Greenwald on the Balance Sheet (risk of financials) (10 minutes)