Why Stocks Trade Below Net Asset Value (Graham-Style)

The three common reasons

1) Lack of popularity: The story isn’t exciting; investors prefer momentum or growth narratives.
2) Neglect by investors: No coverage, low liquidity, little IR effort; screens and analysts skip it.
3) Hard to understand or analyze: Complex, opaque, or messy financials make investors apply a steep discount.

How to assess each

• Popularity: Check news/mentions, search interest, and peer multiples. Thin buzz plus cheap assets = potential.
• Neglect: Look at liquidity, coverage, and filings cadence. Neglect can be an opportunity if the balance sheet is real.
• Complexity: If you cannot model it, discount harder. Prefer simple cash/asset stories you can verify.

Quick checklist before acting

• Balance sheet: Verify current assets vs liabilities; haircut weak inventories/receivables.
• Share count: Check for dilution risk (recent issuances, warrants, convertibles).
• Cash burn: Confirm the business isn’t rapidly consuming the net assets.
• Catalyst: Any reason the discount could close (buyback, liquidation, asset sale, re-rate)?

How to use this

• Screen for net-nets, then tag them by these three reasons.
• Favor “neglect” and “unpopular but simple” over “complex and opaque.”
• Size positions smaller when the discount relies on hard-to-value assets.