Cash-rich firms offer value investors options

VALUE investors in Singapore have endured a rough time in recent years. As the market tanked, most cheap stocks, conventionally defined as having a low price-to-earnings ratio or a low price-to-book ratio, simply got cheaper. Poor business fundamentals meant their cheapness was justified.

As these stocks tend to be illiquid with wide bid-ask spreads, would-be investors are also limited in the amount they can plonk in without pushing the price up. Meanwhile, a small sale can trigger a sharp drop.

Another issue is many of these companies are just too small in their operations. Investors have to shoulder a much higher risk that these firms can continue to sell their services and products and stay afloat, without necessarily being supported by banks.