As of this writing, the S&P 500 is up about 11.5 percent year-to-date, while the Russell 3000 has gained about 14.5 percent.
But the smallest of the small, the micro-caps, had an even better year. The Russell Microcap Index is up 17.2 percent year-to-date. The Russell Microcap Value Index did even better and is up 20.2 percent year to date. This index is comprised of companies with a weighted average market cap of just over $300 million, an average price to book ratio of 1.1, and dividend yield of 2 percent. It's the type of pond where I love to fish. Although the risks are great, so too can be the rewards. It just takes a bit more homework, because many of these companies just don't get much press or analyst attention.
Heading into 2013, I am taking one last look at one of my favorite deep value screening techniques: companies trading for less than their net current asset value. We end 2012 with just seven net/nets that have market caps in excess of $100 million. The cupboard is pretty bare in net/net land.
FormFactor ends the year at the top of the list in terms of market cap ($242 million). The semiconductor name currently trades at 0.87 times net current asset value, 0.71 times price to book, and has $276 million, or $5.50 per share, in cash. FormFactor has not turned a profit on an annual basis since 2007, which is one reason that it trades so cheaply relative to net current assets.
RadioShack ends 2012 as the second biggest net/net. The company had a terrible year, and is viewed by many as a dinosaur on the way to extinction. I've not yet given up on the notion that the company's assets are worth more than the current stock price, but I may be among the few who still hold that view. Oh, I'm not crazy; I believe the company's best days are behind it for sure. I just think there may be some value to extract.
Richardson Electronics, Trans World Entertainment, and Westell Technologies are the only names on the list that are profitable in the trailing 12 months. The others — Imation and Axcelis Technologies — can't make that claim.
The year ends with very slim pickings in net/net land.
Here's to a healthy and prosperous 2013!