Back in early March just days before the rally I was considering the possible returns of a Net-Net portfolio when the market rebounded. I never built the diversified portfolio of Net stocks like I was thinking of. This turns out to be good and bad. Part of the reason I didn't build it had to do with the fact that the data can be back-tested with the right database and software. Grab a cup of coffee and relax this post is a long one.

The other part is I've never been a fan of over diversification. Why accept market like returns? I understand the validity of it with Net-Net's but I like capital appreciation and would rather be a stock picker with them because I can be a very good one. This quote below has always made sense to me when it comes to anything investing wise and it can be applied to about anything financial.

to carry ones eggs in a great number of baskets without having time or opportunity to discover how many have holes in the bottom is the surest way of increasing risk and loss. -John Maynard Keynes

In this post is a lot of the Net-Net's I cherry picked recently and over the financial crisis led market death spiral. Here is the post with the links to most of the net-net's that I selected bottom up based on their qualitative and quantitative attributes. If you go back and look at a lot of those Net-Net's in that article and ones that I didn't even include in it like Pier One PIR that had an astounding 1,700% return from its March bottom I was onto actually.

"Pier One PIR is desperately trying to bottom. Lot of buyers at $.12. Stock is about 30% of NCAV mostly inventory. Long-term debt is stable but it's a crap shot."

The technicals said go but most of my thoughts on the fundamentals said don't buy. The net current asset valuation was the writing on the wall though and I ignored it because I think to much which is usually a good thing. Well, I did find it interesting with the sub NCAV valuation and that is why I posted it and mentioned it for anyone interested. I guess it was also partly being afraid to be contrarian because of the unique economic crisis we have been going through.

The lesson is always go with a stock below net current asset value that jumps off the screen on me. They usually will outperform like a Finish Line FINL or Heelys HLYS. Finish Line ran 170% after I posted on it and Heelys 30%. Tuesday Morning TUES was on the blog at $1 in February and hit $3.90. It goes on but I think you get the point.

What Pier One PIR and all those amazing returns tells us is that Net-Nets(net current asset values) can be useful as a contrarian strategy but more importantly can be individually picked versus diversifying if you pick them like me. If I had gone with a diversified portfolio instead or market-cap weighted I imagine the results would have been more on par with the overall indices and small-cap market.

Many Net-Net's have done quite well after I post them on the site as you can see. My accuracy with them on the blog and the ones that I didn't even include in those previous articles like MLR's 30% run after I picked it and so on has me considering charging a small monthly fee for access to my best Net-Net stock selections and contrarian picks (see Best of on righthand side-bar for just a portion of them).

I don't have the time to scan for short-term momentum trades like I do for my trading everyday and do the time consuming heavy research that is needed into companies for investing. I'm getting to a point where I need to get compensated for my time on fundamental analysis picks like Net-Net's.

Stock Pursuit is by far the best site for Net-Net picks. It is often imitated but never trumped. This includes many other sites and blogs that will only post one hit wonder articles on the strategy and its history with maybe a dozen random stocks meeting the criteria. No other site that I know of posts as frequently and consistently strong returns from their Net-Net picks as Stock Pursuit does.

Google is with me on this as Stock Pursuit ranked 4th out of 117 million other sites for "stocks below net current asset value" and in the top 5 out of 30 million for "net current asset stocks". Google ranks sites based on authority and frequency of new content.

This blog will always keep going though with free content in one form or another so any pay site I do will be on a different site all together possibly. All of this subscription model depends on the momentum I can get going forward. I might include my pure technical picks as well on another site. Either or both of these might be moving to my domain DynamiteStocks.com We aren't talking expensive here. Maybe $1 to $5 a month. There will probably be a poll on the site sometime soon to see what readers and new visitors want so I can get the logistics in order to best serve you.



full disclosure: no positions