Still More on Goodfellow Inc.

I found an article at Seeking Alpha on Goodfellow Inc. The author, Jonathon Goldberg, make some interesting points. But I have to dispute one thing he says. Mr. Goldberg writes "The fact that GDL can be bought for less than its current assets (after satisfying all liabilities) has no implications for an investor." At the time of writing of the article, Goodfellow was trading for $7.90 agains net current assets of $8.43 per share.

I believe this fact actually does have some implication to the investor, as would, I believe Benajamin Graham, who devotes an entire chapter of Security Analysis to the importance of net current assets and the implications when they exceed the stock price. In the case of Goodfellow, the net current assets have acted quite effectively as a floor to the stock price. The chart below shows the year-end net current assets per share (split adjusted) for Goodfellow back to 1996 (the blue line). The pink line represents the low price for the stock the following year (for the stock prices I used Nov - Oct -- Goodfellow's year end is August, so by the end of October we can safely assume that the market is fully aware of the net current assets per share). The graph clearly shows that the share price rarely falls below net current assets and when it does (only during the recent market meltdown), it has been a buying opportunity. Please note that the years along the x-axis run backward, from 2009 to 1996. Also note that the 2009 low share price is for the past month and a half only.



Obviously just because this has held in past is no guarantee it will hold in the future. During this period Goodfellow showed a very steady increase in its net current assets and this trend was likely also a contributor to keeping a floor on the share price. But still, the graph demonstrates that the net current assets clearly have some relevance to the investor.

Disclosure: I own shares in Goodfellow Inc.