Top Four Net/Net Plays

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As pessimism continues to dominate equity market activity, the "low tide" environment continues to banish more companies to the land of the net/nets. At last glance, I counted 367 companies trading below their net current asset values -- that is, in the simplest terms, current assets minus total liabilities, preferred equity and minority interests, if applicable.

In all fairness, the data from this stock screen has not been scrubbed and is inclusive of all companies with market caps above $5 million. However, the top of the list still includes some fairly large companies, at least as far as net/nets go.

What's more, several of these names are currently profitable. Some have relatively large amounts of cash and/or marketable securities on the books as well. Perhaps not surprisingly, those at the top of the list in terms of size (as measured by market cap) are all technology-related companies.

The last time we saw this many net/nets was in the aftermath of the tech bubble. Tech companies dominated then too, but the primary difference was that they were typically not profitable and did not have the liquidity and strong balance sheets we are seeing today.

The downside to this story is just how pessimistic investors have become. I'm a firm believer that the negativity constantly bombarding consumers and investors has forced many to the sidelines. We are in a "negative news cycle" for lack of a better term, and I continue to see the talking heads that reach most Americans dole out their daily doses of negativity, but often using apples to oranges comparisons to demonstrate just how bad things are.

I don't believe it's done maliciously; perhaps it's due to either a lack of proper research, the acceptance that all news these days must be bad by nature, or that it grabs ratings. While I'm not arguing that all is right with the world, I do believe that the lack of hope -- which is interestingly enough being perpetuated by the Obama administration -- helps to feed this recession.

Nonetheless, the environment is an interesting one if you believe that there are better days ahead, especially for companies that have the resources to weather several bad quarters.

Three Techs and a Jeweler Top Four Net/Nets by Market Cap Company Ticker Market Cap NCAV Mkt Cap/NCAV Price Price/Book Cash & ST Inv PE Ingram Micro IM 2040 2364.5 0.86 12.37 0.6 807 8.1 Tech Data TECD 956 1415.2 0.68 19.15 0.57 385 9.1 Sycamore Networks SCMR 710 823 0.86 2.51 0.73 823 NA Signet Jewelers SIG 647 977.3 0.66 7.6 0.31 36 3.5 SOURCE: Company Reports

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