Please enable JavaScript.
Coggle requires JavaScript to display documents.
Net Net Stock (Why (Pure quantitative approach (No emotion attached, No…
Net Net Stock
Why
Proven higher return than market
Market cannot be predicted
Hard to time the market
Contrarian
Exciting?
Pure quantitative approach
No emotion attached
No guesswork on quality
Diversification
Margin of Safety
Short term duration
1-3 years
What
Value investing technique
Long-term assets are treated as being worthless
If a net-net were to be liquidated
Current Assets to settle all Liabilities
By using Current Assets, it is
highly conservative estimate of liquidation value
Leftover cash worth more than Market Capitalization
Getting free Long-term Assets
Market Cap / NCA
Net Current Assets
+ Current Assets
Inventories (50%)
Accounts receivable (at 75%)
Cash and Cash Equivalents (at 100%)
Short Term Investments (at 90%)
Prepaid expenses (at 25%)
- Total Liabilities
Non-current Liabilities
Current Liabilities
Market
Capitalization
Total Outstanding Shares X Share Price
The lower the ratio the cheaper the stock
Problem/Risk
Attractive as short-term but poor long-term investment
Unprofitable company -> Declining Net Current Asset Value
Company unlikely to liquidate
itself outside of bankruptcy
Company will continue operating
If it's consistently profitable
No reason to believe its profit will dry up
Very close to a sure thing
this strategy doesn't work all of the time
How
Buy Strategy
Market Cap < 60% of CNAV
Burn Rate for past 3 years
Positive revenue
Sell Strategy
Duration more than 1 year
Burn Rate
Protect your downside
Burn Rate
Increasing NCAV
Duration (Deteriorate of returns)
Margin of Safety
Diversification
Market
Sector
No China Companies and Resource Exploration Companies
Profitability History
Where
Cash
SRS
OCBC
Stand Chart
Market
SGX
US
HK
Japan
Australia
Europe
When