How we measure the Floor

The Floor and the spread

The Floor is owner cash per share: what is left after a business pays to keep itself running.

We read the latest annual report (the 10-K) from the SEC. That filing is the audit: the business, the risks, and the yearly statements. We take operating cash, subtract wear-and-tear (using depreciation as the stand-in for upkeep), then use cash, debt, and shares. Growth spending stays out. Short-term inventory swings are skipped when we can see them.

The latest quarterly report (the 10-Q) updates those cash lines. It does not replace the annual audit. Cash flows are a full trailing year — never nine months treated as twelve. Cash, debt, and shares are the quarter-end snapshot. Each ticker card shows the annual date and the quarter the cash is through. A press release or buyback plan is not cash until it shows up in those statements.

That owner cash is treated as a stream that can continue. We discount it, subtract debt, add spare cash, and divide by shares. That number is the Floor. It is not a target price, a story about the future, or an AI opinion.

How hard the business is to run, and whether cash goes back into the plant, can trim that stream. Those trims change the Floor. They are not a second ranking.

We rank by Vitality Spread: how far the stock is from the Floor, as a percent — (price − Floor) / Floor. A missing Floor or a Floor at or under zero is not published. A negative spread means the stock is below the Floor. Cheapest spread is rank 1. That is a measurement, not a recommendation.

Three books, one Floor

Every book uses the same owner cash and the same long and short rules. They differ in which names you see, and whether an AI can move the Floor.

• Numbers-only: the shared book. Industry defaults and fixed rules set the Floor. Ranked every night as prices move.
• Custom numbers: that shared book, plus up to 200 names you add. Same rules. A new name is usually ready in a few minutes. Remove it to free the slot. If you still have it long or short on Portfolio, the nightly run keeps updating it.
• LLM: same owner cash, more context. An AI reads the annual filing and can raise or lower the Floor when the company is stronger or weaker than its industry label. The shared LLM book is the 160 cheapest and 90 most expensive spreads from the numbers book. You also get 200 personal LLM names. Cash from the quarterly filing can still move the Floor; prices update every day. The card stays numbers — no write-ups. A name you still have long or short keeps the weekly AI read even if it leaves the shared 250.

If the annual filing points to a real structural shift (heavy research, a high-growth build, and the like), the LLM card can also show a Step Floor. That is a second picture of upside. It is not the going-concern Floor, and it does not change rank or long and short.

Marking long or short saves your choice and that book's rank at that moment. Those marks live on Portfolio, so you can see how rank has moved since you logged the name.

The V-Score (1 to 5)

The book is sorted by spread. Every name also gets a V-Score from 1 to 5.

V-Score is a quality check. It asks whether the business does real work or mostly collects a toll, how hard it is to run, and whether cash goes into the plant or into buying back stock. That sets a ceiling: how far above the Floor the stock is allowed to trade. The scores mean:

• 5: high quality, and the stock is below the Floor. The recent trend is up and the stock is not stretched.
• 5-: the same quality as a 5, but the recent trend is down or the stock is stretched.
• 4: high quality, and the stock is still under its ceiling. The recent trend is up and the stock is not stretched.
• 4-: the same quality as a 4, but the recent trend is down or the stock is stretched.
• 3: acceptable quality, still under its ceiling.
• 2: the stock is through its ceiling, or too much cash went to buybacks instead of the plant, or quality is soft.
• 1: mostly a toll collector, worn down, and trading above its ceiling. Short timing is open.

A cheap name can still score a 2 if quality is soft. A 4, 4-, 5, or 5- is a reading, not a buy list. For the long rule, a 4- or 5- counts as a 3. A plain 4 or 5 appears only when the recent trend is up and the stock is not stretched.

On the book, the V column is the score and the ceiling together, with no percent sign. The number after the colon is how far above the Floor the stock may trade. 3: 50 is a V-Score of 3 and room of 50%. 2: 0 is a V-Score of 2 and no room — that business is not allowed to trade above the Floor. A name at a +40% spread with 4: 100 still has room. The same spread with 2: 0 is already through its ceiling.

The same ticker can print a different pair on the two engines. The numbers book guesses real work versus toll from the industry. The LLM book reads that split from the filing, and its trims can move the Floor, so a spread can sit under one ceiling and through the other. On the LLM book, the numbers Floor sits next to the LLM Floor. LLM 4: 100 is the filing read and Numbers 3: 35 is the numbers-only read. A dash on the numbers pair means that name is not on the numbers book or your custom numbers book. The long rule on the LLM book uses the LLM score.

One way to use it

This book uses V-Score as a gate. That is one way to use it, not the only one.

• Long: look for a price under the Floor (a negative spread). If the V-Score is 2 or lower, pass — even at a deep discount.
• Short: look for a spread of +1000% or more (the Floor sits 1000% or further below the market). V-Score is not the short trigger. If ATM bid or LBO bid sits under the ticker, read that marker before treating the name as a short.

ATM bid

Some property companies pay a dividend they cannot cover with owner cash. They sell new shares into the market — often through an “at-the-market” program — and use that money to fund the buildings and the dividend. The stock has a buyer the Floor does not count: the company itself.

ATM bid is a marker, not a Floor input. It does not change rank, the long rule, or the +1000% short trigger. It marks a REIT that can sell new shares to support the stock. A short there is betting against that share-sale bid. On the book it sits under the ticker. On the card it sits with the Floor.

Open those names before treating a +1000% spread as a short. The stock can keep rising on share sales the Floor does not count.

LBO bid

Some companies return more cash than the business earns after maintenance — large buybacks, often with a special dividend — and fund the gap by borrowing. The company itself is buying the stock with leveraged cash.

LBO bid is a marker, not a Floor input. It does not change rank, the long rule, or the +1000% short trigger. The Floor already subtracts the debt, so the Floor can look tiny and the spread can look like a short. A short there is betting against that leveraged buyback bid. On the book it sits under the ticker. On the card it sits with the Floor.

Open those names before treating a +1000% spread as a short. The stock can keep rising on buybacks funded with debt the Floor already counted.

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