Current assets minus all liabilities (both current and long-term). Graham's ultra-conservative value floor — any stock trading below this is statistically cheap.
Deeper Explanation
Graham developed net-net analysis for situations where he did not trust reported earnings and wanted to know the bare minimum a business was worth in liquidation. The formula: cash + (0.75 × receivables) + (0.5 × inventory) − all liabilities. A stock trading below two-thirds of net-net value is Graham's purest "buy" signal. Net-nets are rare in modern markets but appear during panics, in neglected micro-caps, and in markets with heavy selling pressure. Buffett ran a concentrated net-net strategy in the 1950s before moving toward quality businesses at fair prices.
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