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5 Stocks That Could Interest Warren Buffett’s Investing Mentor Today

The late Benjamin Graham may not be very well-known outside investing circles, but he’s a bona-fide legend within.

As a professional investor, Graham generated a fantastic market-beating long-term track record. But that’s not all. He was also the well-respected mentor of billionaire investor Warren Buffett, and the author of two classic investing texts, Security Analysis and The Intelligent Investor.

Investing with a legend

In Graham’s days managing money, one of the methods he used to determine if a stock was a bargain was to compare its market capitalisation with its net current asset value. (The net current asset value of a stock can be found by subtracting a stock’s total liabilities from its total current assets).

Graham wanted to find stocks with market caps that are lower than their net current asset values; such stocks are now known commonly as net-nets.

The problem with net-nets is that they are typically mediocre companies at best, or poor at worst. Companies that become net-nets often have zero competitive advantages and can be in serious business trouble. That’s why Graham advocated diversifying widely when he was investing in them.

Putting it into action today

I wanted to see how many net-nets there are currently amongst the 700-plus Singapore-listed stocks that are in the database of my data provider, S&P Global Market Intelligence.

Turns out, there are 95 net-nets in Singapore right now. But, I also wanted to refine my search criteria so that only the least-risky net-nets can come through. So, I added two more conditions: A company must have (1) a debt-to-equity ratio of less than 50%, and (2) positive net income over the last 12 months.

The two conditions were chosen to help find profitable companies that are not carrying high amounts of debt.

At the end, 40 names filtered through. Here are five I randomly chose: Cortina Holdings Limited (SGX: C41), Hanwell Holdings Ltd (SGX: DM0), HG Metal Manufacturing Ltd (SGX: BTG), Kingboard Copper Foil Holdings Limited (SGX: K14), and Nobel Design Holdings Ltd (SGX: 547).


Source: S&P Global Market Intelligence

So as you can see, the quintet of Cortina, Hanwell, HG Metal, Kingboard, and Nobel Design have low valuations, decent balance sheets, and profitable businesses. Given these, they are companies in Singapore’s stock market today that could possibly interest Graham if he were around and studying the markets here.

But, it’s worth noting that none of the above should be seen as formal recommendations of the five aforementioned stocks or the use of the net-net methodology to pick stocks. Instead, see the information presented in this article as useful starting points for further research.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn't own shares in any company mentioned.