Some companies trade so cheaply that their cash balance is worth more than the company's enterprise value (i.e. the sum of the market cap and total long term debts). This is known as a negative enterprise value (EV) and searching for such companies is a common bargain stock strategy. While, in theory, a negative EV may seem to be an easy arbitrage opportunity, whereby one could buy all of the debt and equity in a firm and use its cash balance to cover costs and keep the difference, there are a number of reasons to be cautious: Firstly, the enterprise value may not have captured all of the debt outstanding in the firm (e.g. the present value of lease commitments) and secondly the cash balance is from the balance sheet (rather than stated at the today's date used for the market cap). Given how quickly firms burn through cash, what you see on the balance sheet may not reflect what the firm has as of today as a cash balance so be careful! You can read more here. To learn more about this strategy please click here »
Negative Enterprise Value
by Jae Jun
Back-tested by Jae Jun on Old School Value for the US market, this strategy exhibited significant outperformance over a 10 year period, albeit with significant volaility.
This screen is based on a UK dataset.
It uses the following criteria:
Results are sorted by:
And limited to the first 200 Results
| Timeframe | Screen Returns | FTSE 100 | Outperformance |
|---|---|---|---|
| 1 week | -0.80% | -0.41% | -0.4% |
| 1 month | -2.69% | -4.69% | 2.0% |
| 3 months | -4.90% | -1.74% | -3.2% |
| 6 months | 8.09% | 7.81% | 0.3% |
| 1 year | 31.07% | 16.34% | 14.7% |
| Since inception | 42.85% | 18.8% | 24.1% |
| Annualised | 26.59% |
| Maximum Drawdown | -15.09% |
| Average No. of Holdings | 12.1 |
| Diversification Level | Moderate |
Chart based on an equal weighted portfolio of max 25 stocks rebalanced quarterly. Qualifying shares below updated daily. Past performance not indicative of future returns.
Can't see the share you expect? View this screen as a checklist to find out why.
