Someone recently asked me what my minimum BVPS would be to consider a company.
There is no minimum book value per share for a couple of reasons.
First, any book value per share is meaningless without knowing how many shares are out there. What we really care about is the total value of the business. We talk about that book value in "per share" prices, but that's just convenient and useful because we almost always buy pieces of a business instead of the whole thing (even though we think of it as buying the whole thing). Seeing the business in terms of its smallest piece makes it easier for us to figure out what our particular pieces are worth. Other than that, the per share thing is useless information.
Considering book value or equity (not "per share"), the second reason we don't have a meaningful minimum is that the key to good investing is buying a wonderful business at an attractive price -- and wonderful businesses can, for a very small investor, be very small or very large. Obviously a small business will have a small BVPS.
The key is knowing you've got the 4 M's. We can buy all of a laundry business with a book value of $10,000 and Sticker Price of $50,000, or we can buy pieces of Exxon. This is the beauty of learning The Rule: it applies equally to purchasing a small laundromat or a piece of Exxon. And it's so simple: Wonderful business, attractive price.
Now, having taught you all that, I have to also teach you that for you and me the difference between large or small public businesses (businesses that have registered with the SEC to trade pieces of the business in stock markets) and small private businesses is liquidity.
What liquidity measures is your ability to get in or out instantly. Little investors have liquidity in many more public businesses than big investors do. We use that to our advantage with the arrows. If a business is trading at least 1 million shares a day and is priced at $2 or more per share, there is enough liquidity for Rule #1 investors to invest $10,000 or so.
Obviously the $50,000 laundry does not meet the liquidity requirement. That means that if you buy it, you may not be able to find a buyer to sell it to in some convenient time period. And that makes for more risk unless you really got a great deal, right? So, after years of doing lots of public and private businesses, I've come to prefer the liquidity of public businesses.
Now go play!