Current Portfolio Size: $4,809.16
Current Projected Dividend yield: 5.14%
Purchases made during March
- Star Pharmaceutical Ltd @ $0.230 for 1100 shares
- Swing Media Tech @ $0.575 for 400 shares
Divestment during March
- IPS Securex @ $0.193 for 1000 shares
For IPS Securex, I made a wrong analysis on it being a good company without properly analysing its financials. After crunching down the numbers, it is way over-priced for its value. Which makes me come to my next point.
Starting from today, I will be experimenting with Benjamin Graham’s Value Investing strategy. This strategy basically talks about purchasing stocks at below their net-net working capital.
Net-net working capital (NNWC) = Cash + short term investment + (0.75 * Accounts Receivable) + (0.5 * Inventory) – Total Liabilities
It should fulfil 3 conditions:
- If Price/NNWC < 67%
- During the past 12 months, the company has generated positive cash flow
- The company has no meaningful debt compared to its cash position.
- Current Ratio > 2.0
The idea of this strategy is to purchase company shares at a value that is net of their current assets, ignoring all effects that long term assets has on their future growth. At the same, to provide a large margin of safety.
I will be experimenting with this strategy in the Singapore context.
Using a filter, I have narrowed down the options to
- Star Pharmaceutical Ltd
- Swing Tech Media
- Memtech International Ltd
One of the problem in investing in such small cap stocks is liquidity risk. As small cap stocks are more thinly trade (low trading volume), there may be a situation where the bid-ask spread is too wide and you can lose a lot if you buy and sell in a short period of time.
This strategy can allow me to be more justified when I start to pick different stocks to include in my portfolio