Net-Net strategy is the safest stock investment strategy
By scheng1
@scheng1 (24649)
Singapore
June 26, 2016 4:54am CST
Net-net strategy is the safest stock investment strategy.
You cannot lose with this strategy at all.
Net-net strategy basically means you use at most a dollar to buy a dollar of value, and not more than that.
When a company has a million dollars in cash, 0 long term debt and 0 short term debt, and a million outstanding share, the net-net value per share is a dollar.
If the share price is 50 cents, you cannot lose. Even if the company closes down today, you will get more than a dollar back. The cash in the bank is enough to pay you a dollar per share.
This net-net strategy does not take into account the value of the building which are fully paid for, and the value of the business.
6 people like this
6 responses
@scheng1 (24649)
• Singapore
26 Jun 16
@skysnap It is the best, but when investors find cash rich companies, they keep on buying the shares until the share price is too high.
If the cash value is $1 per share in the bank account of the company, and you have to pay $10 to get a single share, that is not net-net.
@scheng1 (24649)
• Singapore
1 Jul 16
It was used for nearly a century, not just a few years ago!
Benjamin Graham was the one who taught this method, and the only thing he had done wrong was not to sell off before the Great Depression.
He did know that the share price was too high for many stocks, but he delayed in selling.
After the Great Depression, he taught this method to many people, including Warren Buffett.
1 person likes this
@scheng1 (24649)
• Singapore
1 Jul 16
@LadyDuck No, if they have waited too long, they will make a lot of money.
The problem is that they do not wait.
They see everyone buying and selling, and they join in the fun.
In the end, they panic when market crashes, and they sell at a loss.
1 person likes this
@scheng1 (24649)
• Singapore
1 Jul 16
Those are not investors. They are gamblers.
Investors will read annual report, financial statements, and many of them go as far as to ask tough questions at the AGM.
Some investors literally behave like a police who interrogate the board of directors and management.
1 person likes this
@Macarrosel (7498)
• Philippines
1 Jul 16
This is the first time I heard about this. If it is the safest stock investment strategy, then surely we won't lose if we use this strategy. That's good.
1 person likes this
