Mark Perkins sends: Benjamin Graham, one of Warren Buffett’s most influential teachers is famous for his net current asset stocks, of which he held as much as 100 at a time in a portfolio in the years after the depression. Buying stocks at a discount to their net current assets less total liabilities placed no value on the fixed assets and is a rough liquidation value. A diversified portfolio of these cigar-butt investments - which involved holding until you get a little price increase (last puff) and sell - was lucrative for Graham with his portfolio dishing out double-digit returns. They still can be found nowadays, although with the advent of stock screeners they are harder to find. Of course, many of them are cheap for a reason and will remain so, but here is an interesting one.

This company, ETERNAL TECHNOLOGIES GROUP, INC. (ETLT.ob) is cheap here, especially considering their most recent quarter. They’ve delivered the steak but the unloved stock hasn’t sizzled. I found them months ago thanks to The Micro-Cap Speculator, and while I was and still am skeptical, I can’t overlook a company that makes me go “wow.” A net current asset stock with an attractive balance sheet, income statement, cash flows, good history, new plans, management that delivers and a stock price that is so cheap it might make an academic question market efficiency.

In the most recent quarter (as of May 15, 2007), net current assets of $41,949,326 stood against 47,073,279 shares of Common Stock outstanding. Multiplying shares times the current price of $.65 a pop = $30.5 mil market cap against net current assets of almost $42 million. This is a huge discount, especially considering the liquidity and quality of these assets.

For the last quarter March 07 in this year 07′ vs 06′
Income highlights
Agricultural and genetics sales $ 5,726,797 vs. $ 3,608,572
Medical devices sales and services 1,498,065 vs. 607,787
Land lease 297,245 vs. -

Total revenue 7,522,107 vs. 4,216,359

Gross profit 1,522,660 vs. 1,161,724

Net income per common share
basic and diluted $ 0.03 vs. $ 0.01

Cash Flows
Net cash provided by operating activities 11,025,082 vs 4,597,423
Cash and cash equivalents, end of period $ 25,299,565

They have a new project found on their website, which is a little unorthodox.

“Thermal Tomography System is a wholly new detecting system, with a leading diagnostic technology which has not yet been reported in the world. At present, the main detecting methods are molybdenum target tube and Doppler imaging system.

This system, without physical contact, trauma, and suffering, is an advanced green detecting method. This system receives information from surface temperature collected by infrared imaging. After automatic analysis, it receives the curve describing temperature. According to the contrast between it and model curve, the diagnostic conclusion can be received fast. During the detection, it is based on objective data, which avoids the inaccuracy made by people.

This technology can be used for detection of many diseases, not only mammary gland, but also other organs of human body. At present, a research group led by Professor Li Kaiyang is researching “process of normal cells into cancerous cells” with this technology. Once successful, this technology will play an epoch-making role in medical diagnosis.”
-Source

“Eternal is a major agricultural genetics and biopharmaceutical R&D firm operating in China with the support of the Chinese Government. Eternal’s animal breeding division has a strong asset base, cash position and net income. Eternal has become one of China’s leading institutions for biopharmaceutical and biotech research, pure breed cultivation and breed stock production. The Company has secured a key market niche by commercializing gene engineering technologies and providing superior breeding stock, allowing China’s citizens the ability to improve their living standards. With the world’s largest population, a double-digit national growth rate and entry into the WTO, Eternal Technologies has a playing field set for tremendous opportunity. As a prominent player in the agricultural genetics industry, cash in the bank and an untapped market, Eternal has the potential to become a major player in China’s national growth.”
-Source

They obviously don’t have a great investor relations department but is its current price justified ceterus peribus. I feel this is a great speculative contrarian opportunity for a small position in a portfolio.

Disclosure: Author is long ETLT.OB