What Buffet would do if he was managing less than 10 million ?

In a recent meeting with shareholders, a question was posed to Warren asking him what would he invest in if he had started a partnership today?

Warren's answer was firm and quick. He said that if he was managing smaller sums of money, he would be investing in companies with a net cash balance. From a balance sheet perspective, the net cash balance is found when you take the cash balance and equivalents and deduct all liabilities from it. To be honest such companies are extremely hard to find especially in the US.

But if you look to other countries, such as singapore, there is a whole list of companies trading below the net asset value.

In fact, when you buy companies trading below net cash, you virtually get the company for free which also includes some freebies such as the excess cash available. A vulture upon seeing such an opportunity, would probably liquidate the company and try to realise the proceeds.

I once spoke about a company on the STI. Its name is Matex International and it was trading at less than the net current asset value. The company had a positive cashflow and also an income stream though the industry was a very competitive one. Porter's 5 forces applied to it would show that it was in an industry that had too many internal and external factors that slowed its growth. It is no longer growing but rather at a stage where industry players are cannibalising each other.

So what? it was trading at 10 - 12 cents then and that was when i scooped it up. There was also a warrants offering to existing shareholders with a major insider scooping most of it. The warrants are excercisable at 16 cents. That being said, Joel Greenblatt did mention that it is very important to look at the actions of insiders. Hence since this insider scooped up the most warrants in a rights offering, it must be that he would have had some incentive to try to boost the company's stock price.

Today, it is trading at 16 cents. More than a decent return 6 months on.

Warren did go on to mention if he did buy companies as such, he might be realising an annual return of 50% a year. And he sounds confident.

Where can you find such stocks? One place that Warren has suggested is Korea. To me, one such place is Sunny Singapore. In fact, i did do some research a while ago. If you all had actually heard of humming bird value where Paul Sonkins is the portfolio manager, he claims that he has good returns in Sunny Singapore.

I am going to conduct more research before i make any more claims. But what i do know is this...Buffet does not speak without any references...He knows what he is talking about...

Cheers!