Tuesday, April 23, 2013

Invest like Benjamin Graham in Singapore stocks

Benjamin Graham is the father of  investing and his way of value investing was to search for net-net stocks where he will construct a basket of stocks as his portfolio. His method of value investing is still being widely practiced by value investors such as Seth Klarman, Third Avenue Management etc. In this blog post, I would like to refer to an article by CLSA to explore the idea of investing in Graham-like stocks in the Singapore stock market.

This is a reprint of an article from brokerage research house, CLSA. In this article, they construct a stock screen that incorporates the attributes that Ben Graham looks for in a undervalued stock and run the stock screen through all the SGX stocks to find stocks that fulfill it. The end result of this stock screen is the Ben Graham Number.

What is the Ben Graham Number?
Graham Number is a concept based on Ben Graham's conservative valuation of companies. Graham Number is calculated as follows:

Graham Number = SquareRoot of (22.5 * Tangible Book Value per Share * Earnings per Share)
= SquareRoot of (22.5 * Net Income * Total Equity) / Total Shares Outstanding

Which Singapore stocks passes the Ben Graham Screener?
The following list of stocks passes:
City Dev
Keppel Land
Parkinson Retail Asia
Singapore Airlines
ST Eng
Semb Marine
Golden Agri
Singapore Post

CLSA article below:

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