Cigar Butts investing

Anyone uses this method of buying stocks which market really don’t want to touch?

I am seeing stocks like Lippo Malls at their lowest points hitting prices like 0.18 and now it is 0.24. If one got vested it nets a gain of 33% in merely more than just 1 month, trouncing lots of stock returns. Just wondering anyone using this technique to gain exposure to stocks which market is throwing away at the moment?

I dont think it has to apply only to Lippo Malls only.
The same can be applied to CDG in 2018 when prices went below $2, and the current one is probably Singtel at below $3

Yup agree it doesn’t apply to lippo malls only.

What is your valuation technique you guys are using for these sort of “net net stocks”?

For me i am using a technique called CNAV (Conservative net asset value) taught previously by bigfatpurse.

This CNAV is new to me. Good, something to learn.

For me, I dont know. Its taken me a while to fix my mindset and most of my non-REITs are bought using SRS which encourages a longer longer term view.

I guess the important ones are

  • think this company still be around when I turn 62?
  • will it still be profit making and pay dividends?
  • think you will be able to buy again at this price?

Back then my logic for CDG at 1.96 was around these. I mean cdg was paying dividends n people were scared that uber which was burning cash would kill CDG? U gotta have faith in those times though, so easy to give up when everyone is dumping.

Even now, as Singtel is going around 2.9+ to 3, how u see?
My colleagues are shunning as though Singtel has leprosy

CNAV requires a lot of patience for value to be unlocked. OKP is one such CNAV stock which saw its shares recently up 10% (20 to 22c).

Did you go for their course on cnav as well? Glad to see someone here .

Yeah! Nice to see you =)

In 2018 I bought 3 CNAV stock, mainly LTC (In at 64c and magically 11 days later got the offer to delist for 92.5c), Delong and OUE.

LTC delisted. Delong too early, exited before the $7 offer. For OUE, now down 20%.

For OUE, it was at a time where I did not know about technical analysis. I now incorporate TA for a better entry if I were to dabble into CNAV stocks.

At the moment, OUE is my only stock. I am looking at Bonvests for the longest time now and more recently OKP. Will think about allocating some resources there…

Are these 3 all cnav stocks?

First of all, cigar-butt investing or deep value is a quantitative-value strategy, the focus is on the net returns of the portfolio, not individual picks. When you invest in a portfolio of deep value stocks, some stocks will out-perform better than the rest, and some will disappoint.

In a deep value portfolio, you will have stocks generating 100% return while some losing -50%. Your long-term track record depends on the yearly net returns of the entire portfolio. Hence to execute this strategy perfectly, you need to diversify adequately and restrict a position limit to each stock so that if one stock fails, it doesn’t drag the entire portfolio down. This is why investors like Ben Graham and Walter Schloss advocate diversification while Warren Buffett concentrates his capital in a few high-quality stocks.

I personally have my own deep value portfolio which I’ve been managing for a few years now. But opportunities to invest in these stocks are becoming limited. So for me, I don’t limit myself to stocks that fits a certain ‘formula’ (NCAV or NNWC eg). I widen my scope to stocks that are still considered undervalued, strong financials and upside catalyst. On top of that, I’ve also widen my scope beyond SG and are currently looking for opportunities within Asia and US. If you’d like to learn more about deep value, you can download my guide here.

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Yes. Largely undervalued.

I use mostly book value to value the ‘Deep Value’ part of it. So for singtel, my screener will never pick it up as it is a ‘Branded’ counter and will mostly always trade above book value. Singtel if i were to buy it, i would probably hold it as a dividend income stock. just my 2 cents

Nice. yeah I have done a little research on us stocks using finviz, another screener website. Glad to see more value investors here discussing.

Yeah the part on it took too much time to unlock value is very true. I used to have some Lion Teck Chiang as well. However did not have patience to realize it’s full value, so now i did a slight twist to the CNAV method, which is to screen for CNAV + dividends which are > 4%, at least i will be rewarded for holding these stocks.