Buy Low, Sell High

The average trader or investor believes that money is made by watching the stock market charts. He or she believes that there is a magic formula, through which the floor and ceiling or momentum of the stock market can be predicted with a very high probability if not certainty. Yet this method of trading has been criticised for its inconsistent and volatile results over the years.

Per Share Value

In contrast, one of this blogger's prescribed way of profitting in the stock market is through the Benjamin Graham's net-net stock strategy.

Net-net investing is the process of buying a company's common shares below a conservative estimate of the firm's per-share liquidiation value. In other words, what would the company definitely or at least be worth if it were liquidated and its cash worth distributed back to shareholders?

This approach and method of valuation gives investors a safe and profitable margin of safety. It ensures that the investor has a fundamental basis for an increase in stock price, in the event that the company continues as a going concern.

Drawbacks

Critics of net-net hunting will query whether the company invested into will indeed go insolvent or bankrupt if the investor invests on the basis of per share liquidiation value. After all, if the market is pricing the company on the basis of liquidation, doesn't it follow that the company will definitely liquidate? Isn't investing very risky?

Benjamin Graham's Net-Net Stock Strategy

Evan Bleker is the online authority for the net-net stock strategy. He writes about this strategy for investing, which has survived for some 100 years.

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