​

Benjamin Graham NCAV/MV Strategy

​

Introduction

The Net Current Asset Value to Market Value strategy, commonly known as the NCAV/MV strategy, is a classic deep-value approach associated with Benjamin Graham. Graham defined net current asset value as: $$NCAV = Current\ Assets - Total\ Liabilities$$ On a per-share basis: $$NCAV\ per\ share = \frac{Current\ Assets - Total\ Liabilities}{Shares\ Outstanding}$$ The strict Graham rule looks for companies trading below liquidation-style value, meaning: $$Market\ Value < NCAV$$ or equivalently: $$NCAV/MV > 1.0$$ The original strategy was designed for deep-value opportunities, typically among smaller companies. In the modern S&P 500 universe, true NCAV stocks are rare because large-cap companies usually trade far above liquidation value. Therefore, this implementation uses a Graham-inspired ranking approach: select the S&P 500 stocks with the highest NCAV/MV ratios.

​

Procedure

The live strategy is implemented as an automated trading agent on ALPACA_PAPER.

​

Configuration

• Venue: ALPACA_PAPER
• Allocated capital: $1,000
• Maximum drawdown limit: 20%
• Universe: Current S&P 500 constituents
• Portfolio size: Top 10 stocks
• Weighting: Equal-weighted
• Rebalancing frequency: Monthly
• Selection metric: Highest NCAV/MV ratio

​

Monthly Process

1. Fetch the current S&P 500 constituents.
2. Pull latest available fundamental data for each stock:
   • Current assets
   • Total liabilities
   • Basic shares outstanding
   • Market capitalization
3. Compute: $$NCAV = Current\ Assets - Total\ Liabilities$$ $$NCAV/MV = \frac{NCAV}{Market\ Capitalization}$$
4. Exclude companies without meaningful current-assets data, primarily banks, insurers, REITs, and other financial firms where NCAV is not economically comparable.
5. Rank remaining stocks by NCAV/MV from highest to lowest.
6. Select the top 10 stocks.
7. Rebalance the portfolio to equal weights.
8. The strategy pauses automatically if drawdown exceeds the configured 20% maximum loss threshold.

​

Results

​

Historical Backtest Summary

The strategy was backtested on the S&P 500 universe from 2020 to 2026 using the top 10 stocks by NCAV/MV ratio.

​

Live Strategy Snapshot

The most recent live screen found that no S&P 500 stocks met Graham’s strict criterion of NCAV/MV > 1.0. The strategy therefore selected the highest-ranking stocks by NCAV/MV. Recent top-ranked holdings included:

​

Interpretation

The historical results were strong, with the NCAV/MV ranking strategy outperforming SPY over the test period. However, the strategy also had materially higher volatility and deeper drawdowns. This is consistent with a concentrated value-oriented portfolio. The strategy is currently configured with a smaller live paper allocation of $1,000 and a 20% max drawdown limit, which should help contain downside risk during adverse market environments.

​

Conclusion

The implemented strategy is best understood as a Graham-inspired large-cap balance-sheet value strategy, not a pure Graham net-net strategy. In the modern S&P 500, companies rarely trade below net current asset value, so the system ranks companies by relative NCAV strength rather than requiring strict liquidation-value discounts. Key takeaways:

• The strict Graham criterion is rarely satisfied in the S&P 500.
• The modified ranking approach historically produced strong returns from 2020 to 2026.
• The strategy tends to select companies with relatively strong current assets and lower liability burdens.
• The approach carries higher volatility and drawdown risk than SPY.
• The live agent trades through ALPACA_PAPER with $1,000 allocated and a 20% max drawdown limit.

This strategy may be most useful as a systematic balance-sheet-value sleeve within a broader portfolio, rather than as a standalone all-weather investment strategy.Written by SHUBHAM JAIN…