JEMTEC

Cigar butt investment is a technique where you find stocks of businesses which are nearly terrible with their performance but you can still purchase it at a very low price to book the profit one last time. The whole idea is that the value of a declining business might be deteriorating, but the price is so low that buying the stock is likely to produce a one-time return as the gap between price and value closes. After that, there is no point to continue to own the stock. The view is that even when the business is not growing there is an expectation that it will appreciate due to other business news and the investor can realize its profit. Warren Buffet used this investment method in the initial phase of its career. He learned this technique from his guru Ben Graham. The word ‘cigar butt’ was used out of an analogy with using up a mostly smoked cigar that has one or two puffs left. It’s kind of disgusting but free. That’s the catch. Ben Graham used to refer generally underval...