One way to determine how cheap or expensive stocks in the local stock market are is to study the number of net-net stocks that are available in the market.
A net-net stock is a stock with a market capitalisation that is lower than its net current asset value. The net current asset value is a simple financial number that can be calculated with the following formula:
Net current asset value = Total current assets minus total liabilities
In theory, a net-net stock is a fantastic bargain. That’s because investors can get a discount on the company’s current assets (assets such as cash and inventory) net of all its liabilities. Moreover, the company’s fixed assets (assets such as properties, factories, and equipment etc.) are thrown in for free.
However, net-net stocks are often companies that are in serious trouble and/or have horrible business economics. This means that investors who invest in those companies are also at risk of seeing their capital evaporate, if things continue heading south.
That’s one reason why diversification is important when investing in net-net stocks. The legendary Benjamin Graham, who liked to invest in net-net stocks when he was managing money professionally, tried to mitigate risks by diversifying widely amongst net-net stocks.
There were 95 net-net stocks as of 12 July 2017. Let’s look at 30 of them sorted according to the following three lists:
1) The 10 net-net stocks that have the lowest market-capitalisation-to-net-current-asset-value ratio;
2) The 10 net-net stocks with the largest market capitalisations; and
3) The 10 largest net-net stocks that have positive net income over the last 12 months as well as more cash than debt on their balance sheets.
Here are the 10 stocks in the first list: Universal Resource and Services Ltd (SGX: BGO), Ace Achieve Infocom Limited (SGX: A75), China Taisan Tech Group Holdings Ltd (SGX: AZW), China Haida Ltd (SGX: C92), Full Apex (Holdings) Ltd (SGX: BTY), Nam Cheong Ltd (SGX: N4E), Matex International Ltd (SGX: M15), China Sports International Limited (SGX: FQ8), Swing Media Technology Group Ltd (SGX: BEV), Vashion Group Ltd (SGX: 43J).Source: S&P Global Market Intelligence (Data as of 12 July 2017)
Here are the 10 stocks in the second list: UOB-Kay Hian Holdings Limited (SGX: U10), Noble Group Limited (SGX: CGP), Hong Leong Asia Ltd (SGX: H22), Kingboard Copper Foil Holdings Limited (SGX: K14), Hanwell Holdings Ltd (SGX: DM0), Cortina Holdings Limited (SGX: C41), Hengxin Technology Ltd (SGX: I85), Baker Technology Ltd (SGX: BTP), Nobel Design Holdings Ltd (SGX: 547), YHI International Limited (SGX: BPF).Source: S&P Global Market Intelligence (Data as of 12 July 2017)
And lastly, here are the stocks in the third list: Kingboard Copper Foil Holdings Limited (SGX: K14), Hanwell Holdings Limited (SGX: DM0), Hengxin Technology Ltd. (SGX: I85), Nobel Design Holdings Ltd (SGX: 547), ISDN Holdings Limited (SGX: I07), Multi-Chem Ltd (SGX: AWZ), HG Metal Manufacturing Ltd (SGX: BTG), Asia Enterprises Holdings Limited (SGX: A55), CDW Holding Limited (SGX: BXE), KLW Holdings Limited (SGX: 504).Source: S&P Global Market Intelligence (Data as of 12 July 2017)
We are not recommending investors buy or sell any of the stocks mentioned above. The purpose here is to simply share the names of some of Singapore’s cheapest stocks at the moment for your own 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.