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  • Introducing 2 New Benjamin Graham Screens [View article]
    Intrinsic Value = EPS x (8.5 + 2xGrowth)

    Benjamin Graham actually gave several warnings about this formula and only used it to show why such oversimplified growth estimates are unreliable. This formula is popular only due to a printing omission in recent editions of The Intelligent Investor.

    Article 1: http://seekingalpha.co... discusses the issue in detail.

    On the other hand, Graham distinctly recommended various categories of stocks - Index, Defensive, Enterprising and NCAV - in the unmistakably named "Stock Selection" chapters. He emphasized that the secret of sound investment was the "Margin of Safety", and specified precise qualitative and quantitative criteria for the stocks.

    For example, given below are the actual Graham ratings for Check Point Software Technologies (CHKP).

    Defensive Graham investment requires all the ratings to be at least 100%.
    Enterprising Graham investment requires the ratings to be at least - CA/2CL : 75%, NCA/LTD : 90%, EPS Stability: 50%, Div Record: 5% and GN/PC: 137%.

    Check Point Software Technologies - Defensive Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 278.00%
    Current Assets ÷ [2 x Current Liabilities]: 81.08%
    Net Current Assets ÷ Long Term Debt: 100.00%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 0.00%
    Earnings Growth (100% ⇒ 30% Growth): 200.14%
    Graham Number ÷ Previous Close: 49.81%

    The Final Graham Assessment for Check Point Software Technologies is also given below.
    The Quantitative Result (Graham Price ÷ Previous Close) for a stock has to be 100% for true Graham investment.

    Check Point Software Technologies - Final Graham Assessment
    Defensive Price (Graham Number): $35.38
    Enterprising Price (Serenity Number): $24.34
    NCAV Price: $1.64
    Qualitative Result: OK / NCAV
    Graham Price: $1.64
    Previous Close: $71.02
    Quantitative Result: 2.31%

    Warren Buffett once wrote an article explaining how Benjamin Graham's principles are everlasting, their results unquestionable, and his followers exceptionally successful. It's called the called "The Superinvestors of Graham-and-Doddsville".

    But most of what Graham actually taught has been forgotten today, and things he warned against are often attributed to him instead. The above formula is just one example. Even when Graham's actual methods are used, they are often modified to fit the stocks rather than having stocks meet them.

    Article 2: http://seekingalpha.co... shows how to do an actual 17-point Benjamin Graham assessment for 5000 NYSE and NASDAQ stocks.
    Sep 1, 2014. 04:16 PM | Likes Like |Link to Comment
  • 5 Companies For Defensive Investors With Low PE Ratios [View article]
    Dear Readers,

    Graham gives the following warnings with this formula:
    1. "Warning: This material is supplied for illustrative purposes only".
    2. "Let the reader not be misled into thinking that such projections have any high degree of reliability".
    3. "Note that we do not suggest that this formula gives the “true value” of a growth stock".

    On the other hand, he distinctly recommends the methods in the unmistakably named "Stock Selection" chapters.

    The two articles mentioned in the first comment have references, page numbers and scans of the relevant pages.

    Thank you.
    Aug 30, 2014. 10:16 PM | 2 Likes Like |Link to Comment
  • 5 Companies For Defensive Investors With Low PE Ratios [View article]
    Here you go, java12jack.

    CA Inc - Defensive Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 904.00%
    Current Assets ÷ [2 x Current Liabilities]: 58.12%
    Net Current Assets ÷ Long Term Debt: 50.88%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 921.54%
    Graham Number ÷ Previous Close: 84.58%

    Serenity Stocks has a complete 17-point Graham assessment for all 5000 NYSE and NASDAQ stocks. You can look any of them up. No signup or subscription required.

    Please keep in mind that Graham's criteria are extremely stringent. Very few stocks clear them completely (by design). But a stock isn't necessarily a bad investment just because it doesn't completely clear the Graham criteria.

    The Graham ratings are simply an assessment of how much within the "Margin of Safety" a stock lies.
    Aug 30, 2014. 02:45 PM | Likes Like |Link to Comment
  • 5 Companies For Defensive Investors With Low PE Ratios [View article]
    Intrinsic Value = EPS x (8.5 + 2xGrowth)

    Benjamin Graham actually warned against this formula and only used it to show why such oversimplified growth estimates are unreliable. This formula is popular only due to a printing omission in recent editions of The Intelligent Investor.

    Article 1: http://seekingalpha.co... discusses the issue in detail.

    Benjamin Graham actually recommended various categories of stocks - Index, Defensive, Enterprising and NCAV. He emphasized that the secret of sound investment was the "Margin of Safety", and specified precise qualitative and quantitative criteria for the stocks.

    For example, given below are the actual Graham ratings for Bed Bath & Beyond Inc (NASDAQ:BBBY).

    Defensive Graham investment requires all the ratings to be at least 100%.
    Enterprising Graham investment requires the ratings to be at least - CA/2CL : 75%, NCA/LTD : 90%, EPS Stability: 50%, Div Record: 5% and GN/PC: 137%.

    Bed Bath & Beyond Inc - Defensive Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 2,300.00%
    Current Assets ÷ [2 x Current Liabilities]: 103.66%
    Net Current Assets ÷ Long Term Debt: 100.00%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 0.00%
    Earnings Growth (100% ⇒ 30% Growth): 182.25%
    Graham Number ÷ Previous Close: 69.02%

    The Final Graham Assessment for Bed Bath & Beyond Inc is also given below.
    The Quantitative Result (Graham Price ÷ Previous Close) for a stock has to be 100% for true Graham investment.

    Bed Bath & Beyond Inc - Final Graham Assessment
    Defensive Price (Graham Number): $44.35
    Enterprising Price (Serenity Number): $31.09
    NCAV Price: $6.82
    Qualitative Result: OK / NCAV
    Graham Price: $6.82
    Previous Close: $64.26
    Quantitative Result: 10.61%

    Warren Buffett once wrote an article explaining how Benjamin Graham's principles are everlasting, their results unquestionable, and his followers exceptionally successful. It's called the called "The Superinvestors of Graham-and-Doddsville".

    But most of what Graham actually taught has been forgotten today, and things he warned against are often attributed to him instead. The above formula is just one example. Even when Graham's actual methods are used, they are often modified to fit the stocks rather than having stocks meet them.

    Article 2: http://seekingalpha.co... shows how to apply Graham's actual 17 stock selection criteria to 5000 NYSE & NASDAQ stocks today.
    Aug 30, 2014. 10:01 AM | 3 Likes Like |Link to Comment
  • Determining Gilead's Fair Value [View article]
    Thank you, somedata1.

    Again, cigar butt stocks only refer to the simplistic NCAV or Net-Net stocks.
    Graham's more important stock recommendations are often ignored.

    Buffett himself wrote an article called "The Superinvestors of Graham-and-Doddsville" describing how Graham's principles are unquestionable and timeless.

    But most of what Graham actually taught is no longer used today, and what he warned against is attributed to him instead. The above formula is a classic example.
    Aug 22, 2014. 02:59 PM | 2 Likes Like |Link to Comment
  • Determining Gilead's Fair Value [View article]
    Thank you for your comment, somedata1.

    Warren Buffett himself says he is 85% Benjamin Graham and 15% Phil Fisher.

    Buffett even named his son after Graham, and describes Graham's book The Intelligent Investor as "by far the best book about investing ever written".

    Given below is part of the conclusion from the study "The Evolution of the Idea of Value Investing: From Benjamin Graham to Warren Buffett" by Robert F. Bierig, Duke University:

    "A [casual] observer of Buffett today would find it difficult to see the Ben Graham influence in many of his activities. However, that influence remains at the core of Buffett’s investment model. Buffett continues to think about stocks as fractional ownership interests in underlying businesses, he continues to operate under the assumption that there is a distinction between price and value, and he continues to search for the largest discrepancy between those two items. In other words, he continues to be a value investor."

    NCAV stocks, or Net-Net stocks, are simply the most well-known of Graham's strategies, and the source of the general misconception that Graham only recommended cheap stocks. But Graham actually recommended Index, Defensive and Enterprising stocks before NCAV stocks and all were allowed higher Quantitative valuations and required greater Qualitative checks.

    Graham did advocate paying more for Quality. His only prerequisite was that there be the Margin of Safety between price and value, whether the value be Qualitative or Quantitative.
    Aug 21, 2014. 01:38 PM | 5 Likes Like |Link to Comment
  • Determining Gilead's Fair Value [View article]
    Intrinsic Value = Earnings x (8.5 + 2 x Growth)
    Or, V = EPS x (8.5 + 2xG)

    Benjamin Graham actually warned against this formula and only used it to show why such oversimplified estimations are unreliable. This formula is popular only due to a printing omission in recent editions of The Intelligent Investor.

    Article 1: http://seekingalpha.co... discusses the issue in detail.

    Benjamin Graham actually recommended different categories of stocks - Index, Defensive, Enterprising and NCAV - with different qualitative and quantitative criteria for each category.

    For example, given below are the actual Graham ratings for Gilead Sciences Inc (NASDAQ:GILD).

    Gilead Sciences Inc - Defensive Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 2,240.00%
    Current Assets ÷ [2 x Current Liabilities]: 57.50%
    Net Current Assets ÷ Long Term Debt: 24.08%
    Earnings Stability (100% ⇒ 10 Years): 70.00%
    Dividend Record (100% ⇒ 20 Years): 0.00%
    Earnings Growth (100% ⇒ 30% Growth): 607.35%
    Graham Number ÷ Previous Close: 18.48%

    Defensive Graham investment requires that all ratings be at least 100%.
    Enterprising Graham investment requires that the ratings be at least - CA/2CL > 75%, NCA/LTD > 90%, EPS Stability > 50%, Div Record > 5% and GN/PC > 137%.

    Article 2: http://seekingalpha.co... discusses Graham's actual investment strategies and shows how to apply his seventeen stock selection criteria to 5000 NYSE & NASDAQ stocks today.
    Aug 21, 2014. 09:22 AM | 2 Likes Like |Link to Comment
  • Who Is John Galt And What Stocks Would He Buy? Part II [View article]
    Thank you, Hardog!
    Aug 18, 2014. 01:49 PM | Likes Like |Link to Comment
  • Who Is John Galt And What Stocks Would He Buy? Part II [View article]
    That's actually a fascinating analogy!
    Rand's books do have a lot in common with Graham's teachings.

    The core philosophy of Rand's books is called Objectivism.
    Graham recommended analysis using only objective past numbers, instead of subjective future estimates.

    Rand said “The hardest thing to explain is the glaringly evident which everybody has decided not to see.”
    Graham said "You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right."

    Rand said "Emotions are not tools of cognition . . . one must differentiate between one’s thoughts and one’s emotions with full clarity and precision."
    Graham said "Individuals who cannot master their emotions are ill-suited to profit from the investment process.".

    Rand said “A creative man is motivated by the desire to achieve, not by the desire to beat others.”
    Graham said "To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks."

    There are many more similarities between the two philosophies. But rather than hypothesizing what a John Galt or a Howard Roark might have done, we could simply follow the extremely precise rules that Benjamin Graham himself has set down for selecting stocks.

    NCAV stocks are simply the most well-known of Graham's strategies, and the source of the general misconception that Graham only recommended cheap stocks. Benjamin Graham actually recommended different categories of stocks - Index, Defensive, Enterprising and NCAV - with different qualitative and quantitative criteria for each category.

    Article 1: http://seekingalpha.co... discusses Graham's 17 stock selection criteria and shows how to apply them to 5000 NYSE & NASDAQ stocks today.

    Also, if memory (from a couple of decades ago) serves, Peter Keating and his "second-handers" from The Fountainhead appropriate Howard Roark's innovative design for an important building and build it themselves, after having made grotesque modifications based on their own incompetent understanding of architecture.

    Roark then destroys this corruption of his genius, as an expression of the struggle of individualism against collectivism. The Graham we know from his books was perhaps too benign and generous for anything so extreme, but here's something a younger Graham himself might have blown up.

    Intrinsic Value = Earnings x (8.5 + 2 x growth)

    This is a formula that is often attributed to Graham today. Graham actually warned against this formula. He only used it to show why such growth predictions are unreliable, and as an example of what NOT to do.

    But incredibly - due to a minor misprint in recent editions of The Intelligent Investor - most analysts claiming to use Graham's methods today, recommend stocks using this formula, instead of the methods he actually recommended in the "Stock Selection" chapters.

    Article 2: http://seekingalpha.co... discusses the issue in detail.
    Aug 18, 2014. 11:30 AM | Likes Like |Link to Comment
  • Have You Been Sucked Into The Warren Buffett Trap? [View article]
    Nice article, but a few points are probably worth mentioning.

    Benjamin Graham actually recommended three different categories of stocks - Defensive, Enterprising and NCAV - with 17 different qualitative and quantitative criteria for finding them.

    NCAV stocks, or Net-Net stocks as you refer to them, are simply the most well-known of Graham's strategies, and the source of the general misconception that Graham only recommended cheap stocks. But Graham actually recommended Index, Defensive and Enterprising stocks before NCAV stocks and all were allowed higher Quantitative valuations and required greater Qualitative checks.

    Graham did advocate paying more for Quality. His only prerequisite was that there be the Margin of Safety between price and value, whether the value be Qualitative or Quantitative.

    Article 1: http://seekingalpha.co... discusses all of Graham's investment strategies in detail.

    The last of the strategies is "Special Situations". But Graham did not recommend it for the ordinary investor as it supposedly required a high degree of skill, experience and resources. But Buffett (being Buffett) has the skill, experience and resources; and almost all his operations do fall in Graham's "Special Situations" category.

    Given below is part of the conclusion from the study "The Evolution of the Idea of Value Investing: From Benjamin Graham to Warren Buffett" by Robert F. Bierig, Duke University:

    "A [casual] observer of Buffett today would find it difficult to see the Ben Graham influence in many of his activities. However, that influence remains at the core of Buffett’s investment model. Buffett continues to think about stocks as fractional ownership interests in underlying businesses, he continues to operate under the assumption that there is a distinction between price and value, and he continues to search for the largest discrepancy between those two items. In other words, he continues to be a value investor."

    Also, in the "Legacy of Benjamin Graham" video released by the Heilbrunn Center, Buffett explains how Graham was focussed on refining methods that ordinary investors - without specialized access - could apply to achieve results similar to his own (Grahams's).

    All of Graham's students follow the same principles, they just apply them in their own ways. Buffett is simply the most visible of them because he's the wealthiest. But the difference between Graham and Buffett is only one of application, not principle.

    On a side note:

    Intrinsic Value = Earnings x (8.5 + 2 x growth)

    This is a formula often attributed to Graham. But Graham actually warned against this formula and only used it to show why such oversimplified growth formulas are unreliable. This formula is popular only due to a printing omission in recent editions of The Intelligent Investor.

    Article 2: http://seekingalpha.co... discusses the issue in detail.

    Hope this helps!
    Aug 14, 2014. 06:22 PM | 5 Likes Like |Link to Comment
  • 5 Undervalued Companies For The Enterprising Investor Near 52-Week Lows [View article]
    Dear Readers,

    Graham gives these warnings with this formula:
    1. "Warning: This material is supplied for illustrative purposes only".
    2. "Note that we do not suggest that this formula gives the “true value” of a growth stock".
    3. "Let the reader not be misled into thinking that such projections have any high degree of reliability".

    On the other hand, he unequivocally recommends the methods in the two Stock Selection chapters.

    The two articles mentioned in the previous comment have references, page numbers and scans of the relevant pages.

    Thank you!
    Aug 14, 2014. 10:22 AM | 1 Like Like |Link to Comment
  • 5 Undervalued Companies For The Enterprising Investor Near 52-Week Lows [View article]
    Intrinsic Value = Earnings x (8.5 + 2 x growth)

    If these valuations are based on the above formula as the ModernGraham website says, Graham actually warned against this formula and only used it to show why such oversimplified growth formulas are unreliable. This formula is popular only due to a printing omission in recent editions of The Intelligent Investor.

    Article 1: http://seekingalpha.co... discusses the issue in detail.

    Benjamin Graham actually recommended three different categories of stocks - Defensive, Enterprising and NCAV - with 17 different qualitative and quantitative criteria for finding them.

    For example, given below are the actual Graham ratings for TJX Companies Inc (NYSE:TJX).

    Defensive Graham investment requires all the ratings to be at least 100%.
    Enterprising Graham investment requires the ratings to be at least - CA/2CL : 75%, NCA/LTD : 90%, EPS Stability: 50%, Div Record: 5% and GN/Price: 137%.

    TJX Companies Inc - Defensive Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 5,484.00%
    Current Assets ÷ [2 x Current Liabilities]: 86.25%
    Net Current Assets ÷ Long Term Debt: 200.14%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 85.00%
    Earnings Growth (100% ⇒ 30% Growth): 266.67%
    Graham Number ÷ Current Price: 36.08%

    The Final Graham Assessment for TJX Companies Inc is also given below.
    The Quantitative Result for a stock has to be 100% for true Graham investment (Quantitative Result = Graham Price ÷ Previous Close).

    TJX Companies Inc - Final Graham Assessment
    Defensive Price (Graham Number): $19.24
    Enterprising Price (Serenity Number): $14.05
    NCAV Price: $0.14
    Qualitative Result: Good / Enterprising
    Graham Price: $14.05
    Previous Close: $53.34
    Quantitative Result: 26.34%

    Article 2: http://seekingalpha.co... discusses Graham's actual 17 stock selection criteria and shows how to apply them to 5000 NYSE & NASDAQ stocks today, with adjustments for inflation.
    Aug 14, 2014. 08:30 AM | Likes Like |Link to Comment
  • Ben Graham's Formula For Value Investing: A Conservative Revision For Estimating Intrinsic Value [View article]
    Hello Adam,

    Thank you for explaining and nice effort! But casual readers sometimes end up using this completely unreliable formula that Graham warned against, instead of the slightly more difficult methods that he actually recommended.

    So it would be good for readers to have the above articles as a reference, to know what Graham actually did and did not recommend.

    Best wishes.
    Aug 12, 2014. 01:47 PM | Likes Like |Link to Comment
  • Ben Graham's Formula For Value Investing: A Conservative Revision For Estimating Intrinsic Value [View article]
    Intrinsic Value = Earnings x (8.5 + 2 x growth)

    Benjamin Graham actually warned against this formula and only used it to show why such oversimplified growth formulas are unreliable. This formula is popular only due to a printing omission in recent editions of The Intelligent Investor.

    Article 1: http://seekingalpha.co... discusses the issue in detail.

    Graham actually recommended three different categories of stocks - Defensive, Enterprising and NCAV - with 17 different qualitative and quantitative criteria for finding them.

    For example, given below are the actual Graham ratings for Suncor Energy Inc (NYSE:SU).

    Defensive Graham investment requires all the ratings to be at least 100%.
    Enterprising Graham investment requires the ratings to be at least - CA/2CL : 75%, NCA/LTD : 90%, EPS Stability: 50%, Div Record: 5% and GN/Price: 137%.

    Suncor Energy Inc - Defensive Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 8,060.00%
    Current Assets ÷ [2 x Current Liabilities]: 69.27%
    Net Current Assets ÷ Long Term Debt: 40.07%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 85.45%
    Graham Number ÷ Current Price: 100.00%

    Article 2: http://seekingalpha.co... discusses Graham's actual 17 stock selection criteria and shows how to apply them to 5000 NYSE & NASDAQ stocks today.
    Aug 12, 2014. 09:45 AM | Likes Like |Link to Comment
  • 5 Undervalued Companies For Enterprising Investors With High Dividend Yields [View article]
    "To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. This book precisely and clearly prescribes the proper framework. You must supply the emotional discipline."
    From the Preface to the Fourth Edition of The Intelligent Investor
    By Warren E. Buffett

    "there has developed the general notion that the rate of return which the investor should aim for is more or less proportionate to the degree of risk he is ready to run. Our view is different. The rate of return sought should be dependent, rather, on the amount of intelligent effort the investor is willing and able to bring to bear on his task"
    - Benjamin Graham, The Intelligent Investor

    Investing successfully doesn't require a genius level IQ, Hardog.
    But it does require a little effort, which will prove more than worthwhile.
    Aug 11, 2014. 02:38 AM | Likes Like |Link to Comment
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