Benjamin Graham - I spanked Warren Buffet!

We found this article from briefing.com which wrote about one of Benjamin Graham's investment criteria and we thought it was a great idea to incorporate it into our investment strategy. This is a bloody stringent criteria to follow that would dramatically reduce the list of stocks we are looking at at the moment, but hey, if not now..then never, right?

Quote:One of Graham's investment fund strategies, as explained in his best-selling book The Intelligent Investor, was to buy stocks that are valued at a discount to their net current asset value. Graham called such stocks "bargain issues." In other words, Graham would look for stocks whose current assets less total liabilities was worth more than what the stock was trading at. This meant that any plant, property and equipment, goodwill and long-term investments were free.
Graham believed this approach lowers risk because if a company defaults, shareholders still stand to recoup their losses and possibly profit as the company is liquidated.
Since many companies that trade below their net current asset value have weak prospects, Graham would often have a portfolio of 100 such stocks to limit the impact of one company defaulting. Graham said that 90% of the bargain issues returned a satisfactory profit over 35 years.
Graham's investment fund, Graham-Newman Corp., returned 14.7% annually from 1936 to his retirement in 1956, versus the 12.2% return of the stock market, according to The Intelligent Investor (revised 2003 version). After 20 years, a $100 initial investment would have been worth $1,533.35 in Graham's fund, compared to $999.67 in the overall stock market.Unquote

SGDividends will now start combing the sphere of SGX shares to see whether there are any such stocks available trading below their net current assets per share. Stay tuned.

Golden Agri - An Interesting Play

"No Fear, No Greed, High Emotion equals low IQ"..."No Fear, No Greed, High Emotion equals low IQ"...we have been chanting this in unison for the past 3 years. This has been a daily routine for us . 100 times before we sleep. 100 times after we wake up.But we digress again..as usual..So whats been in our radar lately?Golden Agri!

Golden Agri has been hogging the top spot in volume trade lately. According to Reuters, it's director, Raphael B. Concepcion, recently mentioned that they are looking at acquisitions now. What an interesting stock..is it a good investment? Let us take a look at some hard facts, shall we?

Based on Thomson Reuters, the net tangible value of Golden Agri is way higher , more than twice, its closing price. Compared to its competitors, it does seem cheap! Yes, it does look damn cheap. But let's not jump to conclusions, shall we? Let's look at one of the most important data (in our opinion). Its Free Cash Flow.

Indo Agri (Below)

Golden Agri(Below)

Wilmar

As we can see, Golden Agri has been enjoying a rather consistent history of free cash flow since 2003 except for that blip in 2006. Indofood Agri does not have a long history of data and Wilmar..oh my...seem to have a rather consistent history of negative free cash flow.

Hmm...Golden Agri just sounds too good to be true!It seems there can only be 2 outcomes, for Wilmar and Indo Agri to go down in price or for Golden Agri to go up in price..which do you think? We just can't wait for 12 November 2008 for the financial statement!

Important: The objective of the articles in this blog is to set you thinking about the company before you invest your hard-earned money. Do not invest solely based on this article. Unlike House or Instituitional Analysts who have to maintain relations with corporations due to investment banking relations, generating commissions,e.t.c, SGDividends say things as it is, factually. Unlike Analyst who have to be "uptight" and "cheem", we make it simplified and cheapskate. -The Vigilante Investor, SGDividends Team