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More recent evidence on the net current asset value method of investing

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Yesterday’s newsletter displayed results from the 1950s of using the net current asset value, NCAV, method of investing published by the originator of the idea, Benjamin Graham. Today I want to take things further by displaying more up to date evidence.


A reminder of the NCAV criteria:

  1. Current asset values are taken from the balance sheet (e.g. inventory, receivables and cash).  From this total are deducted all the liabilities. Long term asset values are usually ignored (counted as zero, with the possible exception of freehold and long leasehold property).  Usually, further deductions are made to reduce inventory and receivable values to give a conservative bias.
  1. Companies passing the quantitative test are also assessed qualitatively for business prospects, managerial ability/integrity and business stability.

So, first today I want to present the evidence of the effectiveness of this method from an academic paper and secondly from my experience over the last decade – I include all the NCAV investment I’ve made (no cherry picking).

As a Professor it was my job to supervise PhD students and publish original research. One of the most interesting studies asked the question:  “If, over the period 1981 to 2000, you had bought a series of portfolios of shares whose prices are less than two-thirds the Net Current Asset Value would you have outperformed the market?”

We (Ying Xiao and I) imagined that we had gone back in time.  We searched the entire Official List each July (average of 1,109 companies).  If the ratio of NCAV to market capitalisation is greater than 1.5 we imagined buying.

We then ‘held’ the portfolios for five years, noting the month-by-month performance and compared it with the general market. The average number of companies fulfilling the criteria in a year was 23.

The average performance of the 20 portfolios is striking (see table): In the first year after portfolio formation the NCAV shares averaged a return of 31% which was almost 11% more than the market.

And it just got better and better the longer you held the shares (up to five years – which is as far as we took it).  This is good news for those of us looking to reduce transaction costs and delay tax payments on gains – just hold onto the shares.

After 5 years, on average, NCAV ‘investors’ had turned £10,000 to £35,402.

Average raw buy-and-hold returns

Months after portfolio formation   12   24   36   48   60
NCAV portfolio (20 formations averaged) 31.19% 75.11% 126.27% 191.62% 254.02%
Market index return averaged over the same months 20.51% 45.98% 73.28% 104.97% 137.18%

(Source: Ying Xiao and Glen C. Arnold (2008) “Testing Benjamin Graham’s Net Current asset Value Strategy in London” Journal of Investing, Winter 2008, Vol 17, Number 4)

There are many other tests in the paper, e.g. the NCAV investments are shown as less likely to be liquidated than the average share – over 5 years the liquidation rate is 2.6% compared with 4.2%.  I guess all those BS assets must be good for something.

Note this paper used a purely quantitative criterion for qualification for inclusion in the NCAV portfolios – only whether the share price is one-third or more below the NCAV.

In an academic paper we cannot test subject factors such as ‘prospects for the industry’ or ‘quality of management’ because these factors though vital, are subjective.  Thus we can improve the sophistication and outcomes by overlaying the mechanical NCAV criterion with judgment concerning the quality of the business. This is something I did when investment in NCAV shares over the last decade. The results are shown below.

My NCAV share selections in the decade after I gave up my chair to invest full-time

The 2013 Net Current Asset Value, NCAV, portfolio

 Company Purchase date   Purchase price   Divs to 31 Mar 2023   Price 31 Mar 2023   Return to 31 Mar 2023
French Con. 25.7.13 £0.3047 zero Sold July 2015 £0.4378 44%
Caledonian T 25.7.13 £0.70 zero Sold April 2020 £1.391 99%
Fletcher King 6.8.13 £0.30 14.25p Sold June 2016 46p 101%
Northamber 22.8.13 £0.287 1.6p Sold Oct 2016 £0.303 11%
Titon 5.9.13 £0.379 6.5p Sold May 2016 £1.06 197%
Mallett 12.11.13 £0.7682 12.7p Sold Nov 2014 £0.60 -5%
AVERAGE                      75%

The 2014 NCAV portfolio

Company Purchase date Purchase price Divs to 31 Mar 2023 Price 31 Mar 2023 Return to 31 Mar 2023
Holders Tech 10.10.14 & 3.11.14 £0.47 1p Sold March 2017 £0.33 -28%
Airea 4.11.14 £0.1195 0.9p Sold Sept 2016 £0.309 166%
Northamber 17.11.14 £0.4265 0.7p Sold Oct 2016 £0.303 -27%
Caledonian T 30.12.14 £1.39 zero Sold April 2020 £1.391 0
AVERAGE                 28%

The 2015 NCAV portfolio

 Company Purchase date Purchase price Divs to 31 Mar 2023 Price 31 Mar 2023 Return to 31 Mar 2023
PV Crystalox 15.1.15 £0.122 zero Sold Dec 2016 £0.237 94%
Arden Partners 1.9.15 £0.422 1p Sold May 2018 £0.364 -11%
Northamber 4.9.15 £0.443 0.4p Sold Dec 2016 £0.303 -31%
AVERAGE                 17%

The AGA holding was doubled 30 April 2015 at a price of £0.9466.

The 2017/18/19 NCAV portfolio

Purchase date Purchase price Divs to 31 Mar 2023 Price 31 Mar 2023 Return to 31 Mar 2023
Caledonian Trust 7.11.17 £1.23 zero Sold April 2020  £1.391 13%
J Smart 30.1.19 £1.13 4.14p Sold Mar/Apr 2020 £1.101 1%
Northamber 6.12.19 £0.504 0.3p Sold Mar 2020 £0.5717 14%
AVERAGE               9%

More Caledonian Trust shares bought in February 2019 at £2.29.

More J Smart bought 30.4.19 at £1.16

The 2020/21 NCAV portfolio

Purchase date Purchase price Divs to 31 Mar 2023 Price 31 Mar 2023 Return to 31 Mar 2023
McCarthy & Stone 1.10.20 £0.718 0 Sold Dec 2020 118.5p 65%
Capital & Counties Properties 6.11.20 £1.032 0 Sold 19 Aug 2021 £1.743 69%
J Smart 18.3.21 & 24.3.21 £1.253 3.22p Sold 7 Feb 2022 £1.575 28%
Fletcher King Feb20 – May21 £0.3265 0.5p Sold Sept21 – Feb22 £0.40 24%
Orchard Funding 7.6.21 £0.568 6p £0.415 -16%
Caffyns 22.6.21 £4.65 30p £5.25 19%
Highcroft 22.7.21 £8.75 78p £9.10 13%
Town Centre Securities 10.8.21 £1.426 1.75p Sold Feb22 £1.581 12%

Bought more Orchard Funding 7.12.22 at 48p

Professor Glen Arnold now offers a Managed Portfolio Service at Henry Spain Investment Services under which clients’ portfolios contain the same shares as his (write to

Risk Warnings: Past performance is no guarantee of future results. Certain investments carry a higher degree of risk than others and are, therefore, unsuitable for some investors. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your initial investment. Where an investment involves exposure to a foreign currency, changes in rates of exchange may cause the value of the investment, and the income from it, to go up or down. Opinions constitute our judgement as of this date and are subject to change without warning. Neither Henry Spain nor any connected company accepts responsibility for any direct or indirect or on sequential loss suffered by you or any other person as a result of your acting, or deciding not to act, in reliance upon any information contained in this Leaflet. Before contemplating any transaction, you should consider whether you require any advice from a financial adviser which we would be happy to provide.  The Managed Portfolio Service will be a fully advised process and advise charges will apply. This is a financial promotion. Henry Spain is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales No. 7118506. Registered Office: 49a High Street, Market Harborough, Leicestershire, LE16 7AF

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