Net Net Portfolio

[Nebula]

Hi,

i have been considering the idea of forming a basket of net net stocks that will form 20-30% of my portfolio.

there are easily 50 net net stocks on the SGX, however most of them happen to be S-chips.

normally, i find higher quality net nets such as PNE industries and Koyo. I think these are single investments that can be good investments by themselves.

was wondering if any buddies have tried making a basket of net nets of shoddy companies and manage to get a decent return from such a strategy.

many companies are selling at a substantial discount and i think that, not all have to come to fruition to actually make a decent return.

seems risky and safe at the same time.

personally, i can stomach the volatility, question is if it is actually a logical choice.

what do you think?

[LLS]

sorry what are net net stocks?

[Nebula]

sorry what are net net stocks?

Hi LLS,

net net stocks are stocks that are selling for 2/3 of liquidation value.

that is, current assets less all liabilities. theoretically, a stock should not be sold for less than its liquidation value, it low price suggest that this company is worth more dead than alive.

this net nets are usually unloved stocks for some reason or other, for s- chips, i think it is due to fear accounting irregularities and fraud and management that are not doing things in the interest of its shareholders that depress the prices.

a catalyst is usually needed to prop up the share price, such as increased earnings, resuming dividends, being bought over, etc.

Ben Graham says that a basket of these types of stocks make a safe and good investment.

this is an alternative to the buffett type "wonderful company at a fair price" which might be hard to pick as it is based on qualitative factors, IMHO.

net net are risky by themselves, but as a diversified list should be a good investment.

however, i have not had the opportunity to hear from other investors if this is really true for our market.

open to any advice or stories any of you might have regarding really ugly net nets.

[wahkao]

is i am also trying to learn up about net net
Yes most are S chips
is this good?

[desmondxyz]

anybody to contribute some net net stock in STI?

[opmi]

Third ave mgt shareholder letters has lots of writeups on net net methodology.


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[cyclone]

anybody to contribute some net net stock in STI?

All companies mentioned by CY09 san in this post are net-net : http://www.valuebuddies.com/thread-5178-...l#pid95964

[CY09]

Hi nebula, I did this methodology of net net in 2012, it came out to be almost all s-chips. I was lucky to escape with a 20% gain then. Was lucky simply because I had invested in a time 'where a rising tide lifted all boats'. It is elaborated more in the latest thread of my Cy09 portfolio listed under the 'others ' section

http://www.valuebuddies.com/thread-5579-page-3.html

I will not advise this method as there are very few non fraud net net stocks on sgx currently as markets are elevated from depressed times. Personally will suggest you try other methodologies

[Nebula]

Hi nebula, I did this methodology of net net in 2012, it came out to be almost all s-chips. I was lucky to escape with a 20% gain then. Was lucky simply because I had invested in a time 'where a rising tide lifted all boats'. It is elaborated more in the latest thread of my Cy09 portfolio listed under the 'others ' section

I will not advise this method as there are very few non fraud net net stocks on sgx now as markets are elevated from depressed times. Personally will suggest you try other methodologies

Thanks for sharing CY09.
That is a pretty decent return for a year. but you seem to suggest that it is not safe.
if you don't mind me asking, did you close out all your positions and move on to other strategies?

[CY09]

Yes I closed most of them except cmz by Feb 2013. My portfoili was rehauled and stocks like super bowl and cse were added. I was lucky I was much restricted in being able to access my brokerage acc when I was in Korea for exchange. It gave me lots of time to understand what value investing truly is and read warning posts by dog and other Vb members