The Intelligent Investor

While Graham's formulas for calculating intrinsic value can get technical, his most famous "Net-Net" strategy is a masterclass in conservative logic. A Net-Net is a company trading at a market price lower than its Net Current Asset Value (NCAV).

The Formula

To find the NCAV, Graham used this calculation:

NCAV = {Current Assets} - {Total Liabilities} + {Preferred Stock}

The "Intelligent" part of this strategy is the Margin of Safety: Graham typically looked for stocks trading at two-thirds (66%) or less of their NCAV.

Why It Works

By ignoring "fixed assets" like buildings or machinery (which are hard to sell) and focusing only on "liquid" assets (cash and inventory), you are essentially buying a business for less than the cash it would generate if it closed down tomorrow. It is the ultimate "bargain hunter" approach, ensuring that even if the business fails to grow, your investment is backed by cold, hard assets.