One way to determine how cheap or expensive stocks are in the local stock market is to look at the number of net-net stocks that are available.
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 can be calculated using the following formula:
Net current asset value = Total current assets – Total liabilities
In theory, a net-net stock is a steal as investors can get a discount on the company’s current assets, such as cash, after stripping off all liabilities. Moreover, the company’s fixed assets, such as properties, are thrown into the mix for free.
Having said that, net-net stocks are usually businesses that are in serious trouble and have terrible business fundamentals. This means that investors who invest in these companies are also at risk of losing their capital if things continue going south.
That is one key reason why diversification is critical when investing in net-net stocks. The father of value investing, Benjamin Graham, who liked to invest in net-net stocks, tried to mitigate risks by diversifying widely amongst net-net stocks.
There were 100 net-net stocks as at 15 August 2017. Let’s look at 30 of them sorted out 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: Ace Achieve Infocom Limited (SGX: A75), China Taisan Tech Group Holdings Ltd (SGX: AZW), Dukang Distillers Holdings Ltd (SGX: BKV), Full Apex (Holdings) Ltd (SGX: BTY), China Yuanbang Property Holdings Ltd (SGX: BCD), Matex International Ltd (SGX: M15), China Sports International Limited (SGX: FQ8), Nam Cheong Ltd (SGX: N4E), China Haida Ltd (SGX: C92) and Swing Media Technology Group Ltd (SGX: BEV).Source: S&P Global Market Intelligence (Data as at 15 August 2017)
Here are the 10 stocks in the second list: UOB-Kay Hian Holdings Limited (SGX: U10), Hong Leong Asia Ltd (SGX: H22), K1 Ventures (SGX: BLT), Kingboard Copper Foil Holdings Limited (SGX: K14), Hanwell Holdings Ltd (SGX: DM0), Delong Holdings Limited (SGX: BQO), Cortina Holdings Limited (SGX: C41), Hengxin Technology Ltd (SGX: I85), YHI International Limited (SGX: BPF) and Baker Technology Ltd (SGX: BTP).Source: S&P Global Market Intelligence (Data as at 15 August 2017)
Lastly, here are the stocks in the third list: K1 Ventures, Kingboard Copper Foil Holdings Limited, Hanwell Holdings Ltd, Hengxin Technology Ltd, Sinostar PEC Holdings Limited (SGX: C9Q), Nobel Design Holdings Ltd (SGX: 547), Multi-Chem Ltd (SGX: AWZ), Asia Enterprises Holdings Limited (SGX: A55), CDW Holding Limited (SGX: BXE) and TLV Holdings Ltd (SGX: 42L).Source: S&P Global Market Intelligence (Data as at 15 August 2017)
We are not recommending that investors buy or sell any of the stocks mentioned above. The purpose here is to merely share the names of some of Singapore’s cheapest stocks at the moment for your own further research.
Meanwhile, learn more about value investing through a FREE subscription to Take Stock Singapore. Sign up here to The Motley Fool’s investing newsletter that will teach you how to GROW your wealth in the years ahead.
Like us on Facebook to follow our latest news and articles. The Motley Fool's purpose is to help the world invest, better.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.