Seeking Alpha
Follows Benjamin Graham method, deep value, value, long only
Profile| Send Message|
( followers)  

Summary

  • OLN, DE, JPM, WFC, and INTC are all suitable for the Defensive Investor following the ModernGraham approach.
  • Each company is rated as undervalued by the ModernGraham valuation model based on Benjamin Graham's formula.
  • All five have strong dividend yields and should be attractive to investors.

There are a number of great companies in the market today. By using the ModernGraham Valuation Model, I've selected five companies reviewed by ModernGraham found to be undervalued according to a model based on Benjamin Graham's formula. Each company has been determined to be suitable for the defensive investor, according to the ModernGraham approach, which is a modernized version of legendary value investor Benjamin Graham's requirements for intelligent investing.

Defensive investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. enterprising investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Each company suitable for the defensive investor is also suitable for enterprising investors.

To see the full valuations of each of the following companies, please visit the ModernGraham Valuation Index.

1. Olin Corporation (NYSE:OLN)

Olin Corp is suitable for either the Defensive Investor or the Enterprising Investor. The Defensive Investor's only concern at this point is the insufficient earnings growth over the last ten years, and the Enterprising Investor's only issue is the high level of debt relative to the current assets. As a result, value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities. As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.46 in 2010 to an estimated $1.96 for 2014. This solid level of demonstrated growth is greater than the market's implied estimate of 2.51% earnings growth and leads the ModernGraham valuation model, based on Benjamin Graham's formula, to return an estimate of intrinsic value above the price.

OLN Chart

OLN data by YCharts

2. Deere & Company (NYSE:DE)

Deere & Co. is suitable for either the Defensive Investor or the Enterprising Investor. The Defensive Investor's only concern is with the high PB ratio while the Enterprising Investor has no significant concerns. As a result, value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities. From a valuation side of things, the company appears to be significantly undervalued after growing its EPSmg (normalized earnings) from $3.68 in 2010 to an estimated $7.77. This strong level of demonstrated growth is greater than the market's implied estimate of 1.57% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham's methods, to return an estimate of intrinsic value that is well above the market price at this time.

DE Chart

DE data by YCharts

3. Wells Fargo & Co. (NYSE:WFC)

Wells Fargo Corp is a company that is intriguing to all value investors as it passes all of the requirements of both the Defensive Investor and the Enterprising Investor. As a result, value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and comparing the company to other opportunities. As for the valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.83 in 2010 to an estimated $3.48 for 2014. This solid level of demonstrated growth more than supports the market's implied estimate of 2.79% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

WFC Chart

WFC data by YCharts

4. JP Morgan Chase (NYSE:JPM)

JP Morgan Chase is suitable for either Defensive Investors or Enterprising Investors. The company passes all of the requirements of both investor types, which is a rare accomplishment. As a result, value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and comparing the company to other opportunities. From a valuation side of things, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $2.92 in 2010 to an estimated $4.75 for 2014. This strong level of demonstrated growth outpaces the market's implied estimate of only 1.49% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price at this time.

JPM Chart

JPM data by YCharts

5. Intel Corporation (NASDAQ:INTC)

Intel Corp is an outstanding company for both Defensive Investors and Enterprising Investors to consider. The company passes all of the requirements of both investor types. As a result, all value investors following the ModernGraham approach based on Benjamin Graham's methods should feel comfortable proceeding with further research into the company and its competitors. From a valuation side of things, the company appears undervalued after growing its EPSmg (normalized earnings) from $1.27 in 2010 to an estimated $1.96 for 2014. This level of demonstrated growth outpaces the market's implied estimate of only 2.33% earnings growth and leads the ModernGraham valuation model to return an estimate of intrinsic value that is well above the market price.

INTC Chart

INTC data by YCharts

Source: 5 Undervalued Companies For The Defensive Investor With High Dividend Yields