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  • Is Warren Buffett A Value Investor? [View article]
    Dear ArtfulDodger,

    Thank you for an informative comment!

    Munger is often quoted (even here on seekingalpha) as having said:
    "assiduity is the ability to sit on your ass and do nothing until a great opportunities presents itself"

    The quote is rarely questioned even though it's completely wrong, both grammatically and by the very definition of assiduity.

    What Munger actually said was:
    "Another thing you have to do, of course, is to have a lot of assiduity. I like that word because it means: sit down on your ass until you do it."

    Then there's the alarmingly misinterpreted "Benjamin Graham Formula" (http://seekingalpha.co...) that is used to analyze stocks more often today than Graham's real methods.

    Buffett's contradictory quotes too sometimes turn out to have been attributed to him by someone else, with no actual record of him having said them.

    This article has tried to dispel some of the myths about Buffett and Graham by quoting published references and studies, all of which indicate that Buffett continues to follow Graham's principles in their most advanced form.

    As mentioned in the article, buying "High Quality Stocks and Businesses at reasonable prices" is very much a part of Graham's Value Investing.

    The very first strategy Graham recommended was to buy the 30 stocks of the Dow. It can't get any more qualitative and less quantitative than that.

    But this really was an informative discussion!
    Perhaps we could agree to disagree here, and let readers make up their own minds.
    Jun 7, 2015. 10:18 AM | 1 Like Like |Link to Comment
  • Is Warren Buffett A Value Investor? [View article]
    Dear ArtfulDodger,

    Nice points about Buffett's showmanship!

    But again, [Value Investing = cigar butts] is one of the biggest misconceptions of all.

    Graham's framework spans the entire breadth of the market; from Blue-Chips and Index stocks, to new issues and NCAVs.

    Both Buffett's "Superinvestors" speech (1984), and his preface to the Intelligent Investor (1986), came much after Buffett started working with Munger.

    Do take a look at references and dates presented in the article.

    Thank you for your comment!
    Jun 6, 2015. 12:06 PM | 1 Like Like |Link to Comment
  • Is Warren Buffett A Value Investor? [View article]
    #3 and #4 have been edited for greater clarity, Hewitt Heiserman.

    Thank you for pointing them out!
    Jun 6, 2015. 11:35 AM | Likes Like |Link to Comment
  • 9 Quick Screens To Identify 'Wonderful Businesses' [View article]
    Benjamin Graham - once known as The Dean of Wall Street - was a scholar and financial analyst who mentored legendary investors such as Warren Buffett, William J. Ruane, Irving Kahn and Walter J. Schloss.

    Buffett describes Graham's book - The Intelligent Investor - as "by far the best book about investing ever written" (in its preface).

    Graham's first recommended strategy - for casual investors - was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various special situations or "workouts".

    The first requires almost no analysis, and is easily accomplished today with a good S&P500 Index fund.
    The last requires more than the average level of ability and experience. Such stocks are also not amenable to impartial algorithmic analysis, and require a case-specific approach.

    But Defensive, Enterprising and NCAV stocks can be reliably detected by today's data-mining software, and offer a great avenue for accurate automated analysis and profitable investment.

    For example, given below are the actual Graham ratings for Visa Inc (V), with no adjustments other than those for inflation.

    Defensive Graham investment requires that all ratings be 100% or more.
    Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Visa Inc - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 2,586.00%
    Current Assets ÷ [2 x Current Liabilities]: 79.60%
    Net Current Assets ÷ Long Term Debt: 100.00%
    Earnings Stability (100% ⇒ 10 Years): 70.00%
    Dividend Record (100% ⇒ 20 Years): 40.00%
    Earnings Growth (100% ⇒ 30% Growth): 0.00%
    Graham Number ÷ Previous Close: 29.45%

    Note: Stocks failing Graham's rules are not necessarily bad investments. They may fall under Graham's "special situations" category. Graham's rules are also extremely selective.
    Jun 5, 2015. 05:56 PM | 1 Like Like |Link to Comment
  • GameStop Is Approaching Fair Value [View article]
    Benjamin Graham - once known as The Dean of Wall Street - was a scholar and financial analyst who mentored legendary investors such as Warren Buffett, William J. Ruane, Irving Kahn and Walter J. Schloss.

    Buffett describes Graham's book - The Intelligent Investor - as "by far the best book about investing ever written" (in its preface).

    Graham's first recommended strategy - for casual investors - was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various special situations or "workouts".

    The first requires almost no analysis, and is easily accomplished today with a good S&P500 Index fund.
    The last requires more than the average level of ability and experience. Such stocks are also not amenable to impartial algorithmic analysis, and require a case-specific approach.

    But Defensive, Enterprising and NCAV stocks can be reliably detected by today's data-mining software, and offer a great avenue for accurate automated analysis and profitable investment.

    For example, given below are the actual Graham ratings for GameStop Corp (GME), with no adjustments other than those for inflation.

    Defensive Graham investment requires that all ratings be 100% or more.
    Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    GameStop Corp - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 1,860.00%
    Current Assets ÷ [2 x Current Liabilities]: 62.90%
    Net Current Assets ÷ Long Term Debt: 120.51%
    Earnings Stability (100% ⇒ 10 Years): 20.00%
    Dividend Record (100% ⇒ 20 Years): 20.00%
    Earnings Growth (100% ⇒ 30% Growth): 200.62%
    Graham Number ÷ Previous Close: 85.25%

    Note: Stocks failing Graham's rules are not necessarily bad investments. They may fall under Graham's "special situations" category. Graham's rules are also extremely selective.
    Jun 5, 2015. 05:49 PM | Likes Like |Link to Comment
  • A Crash Course In Value Investing From Columbia: Why Wal-Mart Is An Attractive Stock [View article]
    > Graham turned his attention from the balance sheet to the
    > income statement when he invented the earnings power method (EPV).

    Kindly share a reference where Graham explains this method.

    Buffett describes Graham's book - The Intelligent Investor - as "by far the best book about investing ever written" (in its preface).

    In The Intelligent Investor:
    Graham's first recommended strategy - for casual investors - was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various special situations or "workouts".

    The first requires almost no analysis, and is easily accomplished today with a good S&P500 Index fund.
    The last requires more than the average level of ability and experience. Such stocks are also not amenable to impartial algorithmic analysis, and require a case-specific approach.

    But Defensive, Enterprising and NCAV stocks can be reliably detected by today's data-mining software, and offer a great avenue for accurate automated analysis and profitable investment.

    For example, given below are the actual Graham ratings for Wal-Mart Stores Inc (WMT), with no adjustments other than those for inflation.

    Defensive Graham investment requires that all ratings be 100% or more.
    Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Wal-Mart Stores Inc - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 97,130.00%
    Current Assets ÷ [2 x Current Liabilities]: 48.47%
    Net Current Assets ÷ Long Term Debt: 0.00%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 135.52%
    Graham Number ÷ Previous Close: 71.84%

    Note: Stocks failing Graham's rules are not necessarily bad investments. They may fall under Graham's "special situations" category. Graham's rules are also extremely selective.
    Jun 5, 2015. 05:46 PM | 2 Likes Like |Link to Comment
  • Generating Excess Returns: Alternative Strategies For Your Portfolio [View article]
    Here's a note on Value and Growth from Warren Buffett's 1992 letter to shareholders:
    "most analysts feel they must choose between two approaches customarily thought to be in opposition: "value" and "growth."
    "In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value, constituting a variable whose importance can range from negligible to enormous and whose impact can be negative as well as positive."

    Growth Investing is not an alternative to Value Investing.
    Growth and Quality, as taught by Benjamin Graham, have always been a part of the Value equation.

    Graham's first recommended strategy - for casual investors - was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various special situations or "workouts".

    The first requires almost no analysis, and is easily accomplished today with a good S&P500 Index fund.
    The last requires more than the average level of ability and experience. Such stocks are also not amenable to impartial algorithmic analysis, and require a case-specific approach.

    But Defensive, Enterprising and NCAV stocks can be reliably detected by today's data-mining software, and offer a great avenue for accurate automated analysis and profitable investment.

    For example, given below are the actual Graham ratings for Sasol Ltd (SSL), with no adjustments other than those for inflation.

    Defensive Graham investment requires that all ratings be 100% or more.
    Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Sasol Ltd - Graham Ratings
    Defensive Price (Graham Number): $42.11
    Enterprising Price (Serenity Number): $32.18
    NCAV Price: -$1.59
    Qualitative Result: Excellent / Defensive
    Intrinsic Value: $42.11
    Previous Close: $33.88
    Quantitative Result: 100.00%

    Note: Stocks failing Graham's rules are not necessarily bad investments. They may fall under Graham's "special situations" category. Graham's rules are also extremely selective.
    Jun 5, 2015. 05:37 PM | 1 Like Like |Link to Comment
  • Cerner Corporation Is Healthy But Overvalued [View article]
    The ModernGraham website cites the following formula as one of the Graham methods applied:
    Intrinsic Value = EPS x (8.5 + 2xGrowth)

    Benjamin Graham actually gave several warnings with this formula and only mentioned it briefly to demonstrate why the market's growth rate expectations are rarely justified. But due to an omission in recent editions of The Intelligent Investor, this formula is often mistakenly used today instead of Graham's actual (and more thorough) methods of stock valuation.

    Article: Understanding The Benjamin Graham Formula Correctly (http://seekingalpha.co...) discusses the issue in detail.

    Another ModernGraham rule mentioned in the above article is:
    "Adequate Size of Enterprise - market capitalization of at least $2 billion"

    Graham actually recommended "Not less than $100 million of annual sales" for this rule. Checking for Market Capitalization instead of Sales will - all else being equal - rate overvalued stocks higher than undervalued ones.

    Graham's first recommended strategy - for casual investors - was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various special situations or "workouts".

    For example, given below are the actual Graham ratings for Cerner Corp (CERN), with no adjustments other than those for inflation.

    Defensive Graham investment requires that all ratings be 100% or more.
    Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Cerner Corp - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 662.00%
    Current Assets ÷ [2 x Current Liabilities]: 185.25%
    Net Current Assets ÷ Long Term Debt: 2,722.22%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 0.00%
    Earnings Growth (100% ⇒ 30% Growth): 285.50%
    Graham Number ÷ Previous Close: 25.92%

    Note: Stocks failing Graham's rules are not necessarily bad investments. They may fall under Graham's "special situations" category. Graham's rules are also extremely selective.
    Jun 5, 2015. 05:31 PM | 2 Likes Like |Link to Comment
  • 3 Impressive Stocks For Under $15 [View article]
    Benjamin Graham - also known as The Dean of Wall Street and The Father of Value Investing - was a scholar and financial analyst who mentored legendary investors such as Warren Buffett, William J. Ruane, Irving Kahn and Walter J. Schloss.

    Buffett describes Graham's book - The Intelligent Investor - as "by far the best book about investing ever written" (in its preface).

    Graham's first recommended strategy - for casual investors - was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various special situations or "workouts".

    The first requires almost no analysis, and is easily accomplished today with a good S&P500 Index fund.
    The last requires more than the average level of ability and experience. Such stocks are also not amenable to impartial algorithmic analysis, and require a case-specific approach.

    But Defensive, Enterprising and NCAV stocks can be reliably detected by today's data-mining software, and offer a great avenue for accurate automated analysis and profitable investment.

    For example, given below are the actual Graham ratings for Mercer International Inc (MERC), with no adjustments other than those for inflation.

    Defensive Graham investment requires that all ratings be 100% or more.
    Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Mercer International Inc - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 236.00%
    Current Assets ÷ [2 x Current Liabilities]: 162.93%
    Net Current Assets ÷ Long Term Debt: 37.92%
    Earnings Stability (100% ⇒ 10 Years): 10.00%
    Dividend Record (100% ⇒ 20 Years): 0.00%
    Earnings Growth (100% ⇒ 30% Growth): 82.11%
    Graham Number ÷ Previous Close: 117.77%

    Note: Stocks failing Graham's rules are not necessarily bad investments. They may fall under Graham's "special situations" category. Graham's rules are also extremely selective.
    Jun 5, 2015. 05:29 PM | Likes Like |Link to Comment
  • Is Warren Buffett A Value Investor? [View article]
    Dear Hewitt Heiserman,

    Explanations are given below.

    1. The Graham framework yields the following intrinsic values for BRK.A
    Defensive Price (Graham Number): $190,730.23
    Enterprising Price (Serenity Number): $126,393.54
    NCAV Price: $37,946.25

    But as mentioned earlier, Berkshire would probably fall under special situations and these valuations would not apply to it. BRK.A is just not a Defensive, Enterprising or NCAV Graham stock.

    2. The analysis you are referring to is different from the one discussed above. The analysis with the "ungraded" result is an outdated one from 2014. The dates of analysis are given with each stock, as well as on the Graham screeners.

    3. That sub heading - like the two preceding it - is often used to argue that Buffett does not follow Graham. If you read the content that follows the sub heading, the content disproves the statement.

    4. Apologies for that Grammatical error. The meaning intended was that there are investors who exclusively follow the NCAV strategy, and the late Mr. Schloss was one of them.

    Thank you for your comment!
    Jun 5, 2015. 03:15 PM | Likes Like |Link to Comment
  • Is Warren Buffett A Value Investor? [View article]
    Thank you for your comment, Hewitt Heiserman.

    Stocks that don't clear Graham's Defensive, Enterprising and NCAV rules are not necessarily bad investments. They may fall under Graham's "special situations" category.
    Jun 5, 2015. 11:40 AM | Likes Like |Link to Comment
  • Dover Corporation Is Fairly Valued But Speculative [View article]
    The ModernGraham website cites the following formula as one of the Graham methods applied:
    Intrinsic Value = EPS x (8.5 + 2xGrowth)

    Benjamin Graham actually gave several warnings with this formula and only mentioned it briefly to demonstrate why the market's growth rate expectations are rarely justified. But due to an omission in recent editions of The Intelligent Investor, this formula is often mistakenly used today instead of Graham's actual (and more thorough) methods of stock valuation.

    Article: Understanding The Benjamin Graham Formula Correctly (http://seekingalpha.co...) discusses the issue in detail.

    Another ModernGraham rule mentioned in the above article is:
    "Adequate Size of Enterprise - market capitalization of at least $2 billion"

    Graham actually recommended "Not less than $100 million of annual sales" for this rule. Checking for Market Capitalization instead of Sales will - all else being equal - rate overvalued stocks higher than undervalued ones.

    Graham's first recommended strategy - for casual investors - was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various special situations or "workouts".

    For example, given below are the actual Graham ratings for Dover Corp (DOV), with no adjustments other than those for inflation.

    Defensive Graham investment requires that all ratings be 100% or more.
    Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Dover Corp - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 1,534.00%
    Current Assets ÷ [2 x Current Liabilities]: 71.04%
    Net Current Assets ÷ Long Term Debt: 38.08%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 134.62%
    Graham Number ÷ Previous Close: 66.50%

    Note: Stocks failing Graham's rules are not necessarily bad investments. They may fall under Graham's "special situations" category. Graham's rules are also extremely selective.
    May 30, 2015. 05:14 PM | Likes Like |Link to Comment
  • 11 Reasons To Be A Dividend Growth Investor [View article]
    Benjamin Graham - also known as The Dean of Wall Street and The Father of Value Investing - was a scholar and financial analyst who mentored legendary investors such as Warren Buffett, William J. Ruane, Irving Kahn and Walter J. Schloss.

    Warren Buffett once gave a speech at Columbia Business School explaining how Graham's record of creating exceptional investors (such as Buffett himself) is unquestionable, and how Graham's principles are everlasting. The speech is now known as "The Superinvestors of Graham-and-Doddsville".

    But most Graham analyses today only follow the quantitative part of Graham's recommendations (NCAV, Graham Number, etc.) without the supporting qualitative criteria, thus leading to the misconception that Graham only recommended inexpensive stocks.

    Here's a note on Value and Growth from Warren Buffett's 1992 letter to shareholders:
    "most analysts feel they must choose between two approaches customarily thought to be in opposition: "value" and "growth."
    "In our opinion, the two approaches are joined at the hip: Growth is always a component in the calculation of value, constituting a variable whose importance can range from negligible to enormous and whose impact can be negative as well as positive."

    Buffett describes Graham's book - The Intelligent Investor - as "by far the best book about investing ever written" (in its preface).

    Graham's first recommended strategy - for casual investors - was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various special situations or "workouts".

    For example, given below are the actual Graham ratings for Wells Fargo & Co (WFC), with no adjustments other than those for inflation.

    Defensive Graham investment requires that all ratings be 100% or more.
    Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Wells Fargo & Co - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 16,664.00%
    Current Assets ÷ [2 x Current Liabilities]: 1.47%
    Net Current Assets ÷ Long Term Debt: 0.00%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 123.42%
    Graham Number ÷ Previous Close: 93.73%

    Note: Stocks failing Graham's rules are not necessarily bad investments. They may fall under Graham's "special situations" category. Graham's rules are also extremely selective.

    Growth is very much a part of true Value Investing, and is checked for objectively - using past growth rates - in Graham's stock selection framework.
    May 30, 2015. 12:38 PM | Likes Like |Link to Comment
  • KLA-Tencor Corp. Is A Great Opportunity For Value Investors [View article]
    The ModernGraham website cites the following formula as one of the Graham methods applied:
    Intrinsic Value = EPS x (8.5 + 2xGrowth)

    Benjamin Graham actually gave several warnings with this formula and only mentioned it briefly to demonstrate why the market's growth rate expectations are rarely justified. But due to an omission in recent editions of The Intelligent Investor, this formula is often mistakenly used today instead of Graham's actual (and more thorough) methods of stock valuation.

    Article: Understanding The Benjamin Graham Formula Correctly (http://seekingalpha.co...) discusses the issue in detail.

    Another ModernGraham rule mentioned in the above article is:
    "Adequate Size of Enterprise - market capitalization of at least $2 billion"

    Graham actually recommended "Not less than $100 million of annual sales" for this rule. Checking for Market Capitalization instead of Sales will - all else being equal - rate overvalued stocks higher than undervalued ones.

    Graham's first recommended strategy - for casual investors - was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various special situations or "workouts".

    For example, given below are the actual Graham ratings for KLA-Tencor Corp (KLAC), with no adjustments other than those for inflation.

    Defensive Graham investment requires that all ratings be 100% or more.
    Enterprising Graham investment requires minimum ratings of - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    KLA-Tencor Corp - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 558.00%
    Current Assets ÷ [2 x Current Liabilities]: 255.97%
    Net Current Assets ÷ Long Term Debt: 493.45%
    Earnings Stability (100% ⇒ 10 Years): 50.00%
    Dividend Record (100% ⇒ 20 Years): 55.00%
    Earnings Growth (100% ⇒ 30% Growth): 126.64%
    Graham Number ÷ Previous Close: 72.70%

    Note: Stocks failing Graham's rules are not necessarily bad investments. They may fall under Graham's "special situations" category. Graham's rules are also extremely selective.
    May 30, 2015. 11:55 AM | 1 Like Like |Link to Comment
  • Why Investing Is A Game Of Failure [View article]
    Incidentally, Graham's first recommended strategy - for casual investors - was to invest in Index stocks.
    For more serious investors, Graham recommended three different categories of stocks - Defensive, Enterprising and NCAV - and 17 qualitative and quantitative rules for identifying them.
    For advanced investors, Graham described various special situations or "workouts".

    The first requires almost no analysis, and is easily accomplished today with a good S&P500 Index fund.

    Also, the Graham formula used on the oldschoolvalue website is a variation of:
    Intrinsic Value = EPS x (8.5 + 2xGrowth)

    Benjamin Graham actually gave several warnings with this formula and only mentioned it briefly to demonstrate why the market's growth rate expectations are rarely justified. But due to an omission in recent editions of The Intelligent Investor, this formula is often mistakenly used today instead of Graham's actual (and more thorough) methods of stock valuation.

    Article: Understanding The Benjamin Graham Formula Correctly (http://seekingalpha.co...) discusses the issue in detail.

    Misquotes and misinterpretations of Value Investing are quite common these days.

    Here's another interesting one, involving Charlie Munger:
    http://seekingalpha.co...
    May 28, 2015. 04:00 PM | Likes Like |Link to Comment
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