10 Companies Benjamin Graham Would Invest In Today - June 2016

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Includes: AMP, BWA, C, F, IVZ, LYB, PFE, PSX, UTX, WDC
by: Benjamin Clark

Summary

These ten companies are all rated as suitable for the Defensive Investor and/or the Enterprising Investor following our approach.

All ten are found to be significantly undervalued according to the our valuation model.

The ten have been selected as some of the best companies we've reviewed.

Click to enlargeOut of the multitude of companies, which ones would legendary value investor Benjamin Graham buy today? I've compiled ten great companies that fit the ModernGraham criteria, based on Benjamin Graham's methods. The companies in this list pass the rigorous requirements of either the Defensive Investor or the Enterprising Investor and are undervalued by the market.

Here are the ten companies Benjamin Graham would invest in today:

Ameriprise Financial, Inc. (NYSE:AMP)

Ameriprise Financial, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the poor dividend history.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $3.92 in 2012 to an estimated $7.78 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.14% annual earnings growth over the next 7-10 years.

BorgWarner Inc. (NYSE:BWA)

BorgWarner Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and the inconsistent dividend history.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.24 in 2011 to an estimated $2.67 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 1.08% annual earnings growth over the next 7-10 years.

Citigroup Inc (NYSE:C)

Citigroup Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years along with the inconsistent dividend history.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $6.47 in 2011 to an estimated gain of $3.81 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.66% annual earnings growth over the next 7-10 years.

Ford Motor Company (NYSE:F)

Ford Motor Company qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years, and the inconsistent dividend history.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.30 in 2011 to an estimated $1.60 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.29% annual earnings loss over the next 7-10 years.

Invesco Ltd. (NYSE:IVZ)

Invesco Ltd qualifies for both the Enterprising Investor and the more conservative Defensive Investor. The Defensive Investor is only initially concerned by the low current ratio while the Enterprising Investor is willing to overlook concerns regarding the level of debt relative to the current assets because the company passes the more stringent Defensive Investor requirements.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.22 in 2011 to an estimated $2.12 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.52% annual earnings growth over the next 7-10 years.

LyondellBasell Industries NV (NYSE:LYB)

LyondellBasell Industries NV is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, the poor dividend history, and the high PB ratio. The Enterprising Investor is only concerned with the level of debt relative to the net current assets.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $-944.17 in 2012 to an estimated $8.48 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 0.4% annual earnings growth over the next 7-10 years.

Pfizer Inc. (NYSE:PFE)

Pfizer Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio as well as the insufficient earnings growth over the last ten years. The Enterprising Investor is only initially concerned by the level of debt relative to the net current assets.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.18 in 2011 to an estimated $1.91 for 2015. This level of demonstrated earnings growth outpaces the market's implied estimate of 3.21% annual earnings growth over the next 7-10 years.

Phillips 66 (NYSE:PSX)

Phillips 66 is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, insufficient earnings stability over the last ten years, and the poor dividend history. The Enterprising Investor is only concerned with the level of debt relative to the net current assets.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $4.40 in 2012 to an estimated $6.75 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.38% annual earnings growth over the next 7-10 years.

United Technologies Corporation (NYSE:UTX)

United Technologies Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only initially concerned with the low current ratio. The Enterprising Investor has concerns regarding the level of debt relative to the current assets.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $5.17 in 2012 to an estimated $7.65 for 2016. This level of demonstrated earnings growth outpaces the market's implied estimate of 2.29% annual earnings growth over the next 7-10 years.

Western Digital Corp (NYSE:WDC)

Western Digital Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only concerned with the short dividend history.

As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $4.74 in 2012 to an estimated $5.98 for 2016. This level of demonstrated earnings growth supports the market's implied estimate of 1.98% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham's formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

Disclosure: I am/we are long F, WDC.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.