About three months ago I wanted to share and teach a friend of mine the
principle behind value investing. I took him through the entire process from:
1.
Identifying the company listed on
the stock exchange
2.
Ensuring that I had the funds in my
brokerage account
3.
Placing a limit order (restricting
the price from going above my bid offer)
- Waiting patiently for the trade to execute
I
was not worried about paying a few extra cents and so I placed the offer for
the stock at $1.36. Within short order the trade was executed. I was confident
and comfortable with the purchase knowing that the stock was close to its 52
weeks low and near an all time low price.
I
know the value of the stock was worth more than the price I paid based on the
book value (about $1.45 billion to the amount of shares outstanding
approximately 1 billion shares). In this case, I would be buying at price to
book of ($1.36/$1.45 = .94). In this case I am buying $1 bill for .94 cents by my analysis.
Unlike
Warren Buffett, in this case, I did not buy $1 for 50 cents, but I am working
my way up to his standard. This would be like a fat elephant opportunity only that this elephant is fast moving.
Less
than three months after my company acquisition, the stock was last traded
at $1.62 when last I checked. That would make me a 19% return on my investment
so far. But I am not selling just yet. Getting the stock is only part of the strategy.
I
know that this company pays a healthy dividends annually, so I am waiting to get
my share of the profit after they have done all the heavy lifting. I tell you what;
this company could easily become a gift that keeps on giving...lol
This
brings me to the next point of the intrinsic value. I am expecting to receive
dividend payments from this company of an average of .15 cents per year going
into the future. So far this year they have paid .8 cents already and we are in
October and I am expecting another dividend payment before the year is out. At
.15 cents dividend per year I would be getting an 11% return on the investment
by not doing anything.
Lets say I keep this for awhile, how long would I have to wait before I get my money back while still holding my shares?
Is
that a simple strategy or what?
Would you like to take look at the company for yourself?
General Accident Insurance Company of Jamaica
Would you like to take look at the company for yourself?
General Accident Insurance Company of Jamaica
Like
and share with ten of your friends.
Feel
free to ask question and make a comment.
FII
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