You need to know playing field is not level. The sellers of goods and services have gobs of information at their fingertips. They know where you live. They have a close approximation of your income. They are aware of your interests. They also know your buying habits.

The information to which they have access is endless. They know age of your car through its registration. The appliances you have because of warranty cards returned. Where you shop because of credit and store cards you have used. How old your mortgage is and what you owe from public recording of deeds.

Because they have this information, you end up on a number of lists. The sorting and use of these lists are an art and science. It is source of mail you receive, offers you are made, and advertising to which you are exposed.

This makes for very effective advertising. They can target your “known” wants and desires. Huge amounts of money are spent to convince you to buy this or that product. You have heard how expensive Super Bowl ads are each year. They pay this type of money because it works.

Benjamin Graham (1894-1976) is considered by many to be architect of Fundamental Analysis and Value Investing. Graham liked to find discrepancies between a stock's price and its value and would buy large portfolios of undervalued stocks, holding them until they became fully valued. In his 1949 book "The Intelligent Investor, Graham describes a stock selection technique that identifies stocks that are trading at a deep discount to a calculated value termed Net Current Asset Value or NCAV.

Calculation of a stock's NCAV is a fairly simple endeavor and is somewhat different from calculation of Book Value. Whereas Book Value is purely a per share measure of Assets - Liabilities, NCAV is a little more rigorous.

In calculating NCAV, Graham only considered Current Assets, i.e. cash, cash equivalents, accounts receivable, inventories. However, from this value he still subtracted Total Liabilities. The result he then divided by number of shares outstanding to give NCAV per share. This value would be considered by Graham to be a fair value for stock.

You might think he would buy at this price, but no. Graham only bought stocks that were trading under two-thirds or 66% of their NCAV. Consider as an example G-III Apparel Group Ltd, ticker symbol GIII.

Current Assets are $130.25M, Total Liabilities are $68.3M, and there are 7.22M shares outstanding.

NCAV = (130.25 - 68.3) / 7.22 = $8.58.

Two-thirds of this price would be $5.66. At time of writing (03/07/05), GIII is trading at $7.67, so may not be a buy candidate at present. It is important to note that Graham would consider NCAV to be a first step in further analysis of stock. A sensible investor would investigate balance sheet further to check for a sound business with other desirable factors such as good earnings,revenue growth, low debt-to-equity, and good operational cash flow per share.