Cheap cash-rich companies on SGX: Opportunity or trap?
This week, we examine stocks that have more cash on their balance sheet than their market value
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A cigar butt found on the street that has only one puff left in it may not offer much of a smoke, but the 'bargain purchase' will make that puff all profit. - Investor Warren Buffett, in 1989 Berkshire Hathaway shareholder letter, beginning a section on his bargain-buy mistakes
THE concept is attractive in theory but far harder, even foolhardy, to execute in practice. If you can buy a $1 stock on paper trading at 60 or 70 cents, why not? Such is the thinking behind bargain-hunting, or attempting to buy stocks trading cheaply by various metrics.
The siren song of cheap stocks has lured many a wannabe value investor to his doom. For example, investors wrongly think that just because a stock is trading at a price to book (PB) ratio of less than one, it is cheap and worth buying.
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