Here's a riddle for you. Say you could own one of two companies:

• Company A, which earns $2 million with $8 million in net tangible assets, and costs $25 million to purchase.
• Company B, which earns $2 million with $18 million in net tangible assets, and costs $18 million to purchase.

Furthermore, let's assume both companies will have flat unit volume for the foreseeable future. Which one would you pick?

A value investor's dream
Hmm ... let's think about this. If you pick Company B, you get more tangible assets, the same amount of earnings, and you're buying at a multiple of earnings of 9, versus 12.5 for Company A. Not only that, but wasn't Ben Graham, the godfather of value investing, a proponent of buying stocks at a discount to asset values?

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