WHAT IS NET-NET STOCK ?
A "net-net" stock is a type of value stock that is typically traded below its net current asset value (NCAV). NCAV is a measure of a company's current assets, such as cash, accounts receivable, and inventory, minus its total liabilities. A net-net stock is considered to be undervalued because the market price of the stock is lower than the NCAV per share.
Investors who follow the net-net strategy look for companies that are trading at a significant discount to their NCAV per share, often 66% or less. The idea is that by buying a stock at such a discount, an investor is effectively getting the company's operating assets for free. This means that if the company were to liquidate its assets, the investor would be able to recover their investment, plus potentially make a profit.
Net-net stocks are often small-cap companies that are overlooked or undervalued by the market, and may have low price-to-earnings (P/E) ratios and high dividend yields. However, investing in net-net stocks carries significant risks, as these companies may have poor fundamentals, low liquidity, and may face operational challenges that could lead to bankruptcy or other negative outcomes. It's important for investors to do their own research and analysis to evaluate the potential risks and rewards of net-net investing.