BT -- The Great Singapore Stock Sale

There is an article in today\'s Business Times that highlighted the value investing style of buying into companies that are trading near to their net current assets. The first component of value investing employed by Benjamin Graham was what his famous disciple Warren Buffett described as \'cigar butt investing\'. Basically, Graham liked stocks that were akin to cigar butts found on the street - still smouldering, and from which it was possible to snatch one or two last puffs. Graham\'s favourite valuation signal was a stock selling at a price below its net current assets - that is, a stock selling for less than its net working capital after deducting all of its prior obligations. In his words: \'The type of bargain issue that can be most readily identified is a common stock that sells for less than the company\'s net working assets alone, after deducting all prior obligations. This would mean that the buyer would pay nothing at all for the fixed assets - buildings, machinery, etc - or any goodwill items that might exist. \'Very few companies turn out to have an ultimate value less than the working capital alone, although scattered instances may be found. The surprising thing, rather, is that there have been so many enterprises obtainable which have been valued in the market on this bargain basis. \'It is clear that these issues were selling at a price well below the value of the enterprise as a private business. No proprietor or majority holder would think of selling what he owned at so ridiculously low a figure. In various ways, practically all these bargain issues turned out to be profitable and the average annual return proved much more remunerative than most other investments.\' And to give himself more safety of margin, Graham advocated buying companies trading at less than two-thirds of their net current asset value. Like to bring this topic up for discussion cos some of the stocks listed down, are really fundamentally poor companies. What do you think?

Take for instance, Westech and United Food. Both coys are experiencing mini crisis of their own. Westech announced last week that their major customer is going bust and they may not be able to collect back a big chunk of their receivables. United Food, on the other hand, has announced profit warning, due to the rising raw materials costs and the sudden plunge in the soy bean prices. The rest of the list, look to me like so-so coys. HTL, still recovering from their recent poor financial performance. Hiap Hoe, a property coy that bought land site at the peak of the property boom cycle. AEI, an aluminium extrusion company that\'s not going anywhere. Sunshine Holdings, a PRC property coy where 2 Executive Directors have just recently resigned. Oh dear.......

the BT article said that HTL directors were buying up HTL shares. i checked, the purchases were minor. i dont think it signals any great confidence in the company

Agreed. Some of these owners thought by buying S$10-50k worth of shares, would show to the public their commitments to the coys. If these management are serious about buying shares, let\'s see some serious monies being poured into it.

Agreed too. But I\'d pay attention to even a small purchase by an independent director who currently doesn\'t own or own a small amount.