Share New Research 
Net-net is a value investing technique developed by the economist Benjamin Graham, in which a company's stock is valued based solely on its net current assets per share (NCAVPS). Net-net investing thus focuses on current assets, taking cash and cash equivalents at full value, then reducing accounts receivable for doubtful accounts, and reducing inventories to liquidation values. Net-net value is calculated by deducting total liabilities from the adjusted current assets.
The formula for NCAVPS:
NCAVPS = (Current Assets - Total Liabilities) ÷ Shares Outstanding
Since I am going to use the formula to rank the stocks, I am modifying the NCAVPS to calculate it not on per share basis but per dollar price.
(Current Assets - Total Liabilities) ÷ (Shares Outstanding * Price)
The strategy filters companies >100 million in market cap, buys 35 stocks ranked in reversed order ranked using the above formula and holds for one year (252 trading days) + 1 day, in order to optimize for long term capital gains tax.
This simple strategy seem to outperform buy and hold S&P500 by about 2 fold YoY and it has further potential to optimize gains by incorporating ranking by market cap to prefer smaller companies or by ranking using additional value metrics.
Guy Fleury
@Denis.
Maybe the first thing to improve your program is to put more on the line.
For instance, I put ten times more as initial capital. It should have produced ten times more, finishing with 21 million instead of 2.1 million.
However, it finished with 195 million, nearly 100 times the original stake. Note that adding more capital increased the trade count by only 11. So, there is more going on in your program. It also had a 24.19% CAGR over the period compared to 13.35% in your version.
The attached backtest should answer all that.
Should you dig to find an answer, you will find that it is due mainly to share rounding.
Denis Litvin
Thanks Guy Fleury. That's a good find
Denis Litvin
Guy Fleury I've been running some tests with different initial capital amounts. The stock number rounding doesn't produce CAGR difference of >1%. I believe the reason you got 24% CAGR is because of minimal market cap requirement of 50 million vs 100 million in my original backtest.
Guy Fleury
@Denis.
Yes. Thanks for having noticed the market cap difference.
Nonetheless, adding a zero to the initial capital and removing a zero from the market cap generated almost 100 times more than the original program when it should have increased by only a factor of 10.
Shuhari
Guy Fleury you completely change the universe with “removing a zero”, affecting the outcome by a factor not related to the initial zero removed.
The change in risk exposure between using market cap limits of 100 million vs. 50 million, or even more extreme between 100 million and 10 million ("remove a zero") is seemingly immense and hard to quantify with just this info.
Denis Litvin
The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by QuantConnect. In addition, the material offers no opinion with respect to the suitability of any security or specific investment. QuantConnect makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances. All investments involve risk, including loss of principal. You should consult with an investment professional before making any investment decisions.
To unlock posting to the community forums please complete at least 30% of Boot Camp.
You can continue your Boot Camp training progress from the terminal. We hope to see you in the community soon!