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  • Simple Sector Adjustment For Value Investing [View article]
    While quantitative methods do have have a lot to be said for them, it may not be a good idea to ignore qualitative factors altogether.

    Warren Buffett once said:
    "In the business world, the rearview mirror is always clearer than the windshield."

    Almost any strategy can be proven to be superlative in retrospect.

    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".

    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 Graham ratings for The AES Corporation (AES), 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%.

    The AES Corporation - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 3,430.00%
    Current Assets ÷ [2 x Current Liabilities]: 55.92%
    Net Current Assets ÷ Long Term Debt: 16.23%
    Earnings Stability (100% ⇒ 10 Years): 20.00%
    Dividend Record (100% ⇒ 20 Years): 20.00%
    Earnings Growth (100% ⇒ 30% Growth): 116.34%
    Graham Number ÷ Previous Close: 68.37%

    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 13, 2015. 12:30 PM | Likes Like |Link to Comment
  • Is Warren Buffett A Value Investor? [View article]
    Hopefully, they will.

    As Irving Kahn said:
    "Graham's principles, though relevant as ever, were increasingly being drowned out by noise."

    Thank you for your comments!
    Jun 13, 2015. 12:21 PM | Likes Like |Link to Comment
  • Aflac Has Great Potential 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 to value stocks instead of Graham's actual (and more thorough) methods.

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

    Another 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 better 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 Aflac Inc (AFL), 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%.

    Aflac Inc - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 4,522.00%
    Current Assets ÷ [2 x Current Liabilities]: 0.00%
    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): 161.12%
    Graham Number ÷ Previous Close: 123.57%

    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 12, 2015. 04:25 PM | Likes Like |Link to Comment
  • Pfizer Inc. 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 to value stocks instead of Graham's actual (and more thorough) methods.

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

    Another 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 better 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 Pfizer Inc (PFE), 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%.

    Pfizer Inc - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 9,922.00%
    Current Assets ÷ [2 x Current Liabilities]: 133.38%
    Net Current Assets ÷ Long Term Debt: 114.36%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 103.03%
    Graham Number ÷ Previous Close: 68.82%

    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 12, 2015. 04:23 PM | 1 Like Like |Link to Comment
  • Halliburton Company Is Financially Strong 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 to value stocks instead of Graham's actual (and more thorough) methods.

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

    Another 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 better 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 Halliburton Co (HAL), 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%.

    Halliburton Co - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 6,514.00%
    Current Assets ÷ [2 x Current Liabilities]: 128.06%
    Net Current Assets ÷ Long Term Debt: 117.16%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 84.81%
    Graham Number ÷ Previous Close: 79.35%

    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 11, 2015. 11:16 AM | 1 Like Like |Link to Comment
  • Did Ben Graham Value Investing Work In The Recent Bull Market? [View article]
    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 Hanger Inc (HGR), 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%.

    Hanger Inc - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 212.00%
    Current Assets ÷ [2 x Current Liabilities]: 165.09%
    Net Current Assets ÷ Long Term Debt: 59.07%
    Earnings Stability (100% ⇒ 10 Years): 70.00%
    Dividend Record (100% ⇒ 20 Years): 0.00%
    Earnings Growth (100% ⇒ 30% Growth): 495.10%
    Graham Number ÷ Previous Close: 108.67%

    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 8, 2015. 06:46 PM | Likes Like |Link to Comment
  • VF Corporation Is Fairly Valued And A Strong Company [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 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 better 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 VF Corp (VFC), 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%.

    VF Corp - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 2,456.00%
    Current Assets ÷ [2 x Current Liabilities]: 129.20%
    Net Current Assets ÷ Long Term Debt: 180.20%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 159.47%
    Graham Number ÷ Previous Close: 38.95%

    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 8, 2015. 11:23 AM | Likes Like |Link to Comment
  • Teradata Corporation Is A Great Company At A Fair Price [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 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 better 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 Teradata Corp (TDC), 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%.

    Teradata Corp - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 546.00%
    Current Assets ÷ [2 x Current Liabilities]: 78.99%
    Net Current Assets ÷ Long Term Debt: 295.90%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 0.00%
    Earnings Growth (100% ⇒ 30% Growth): 166.40%
    Graham Number ÷ Previous Close: 63.55%

    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 8, 2015. 11:13 AM | 2 Likes Like |Link to Comment
  • Is Warren Buffett A Value Investor? [View article]
    Thank you for your comment, Albertasunwapta!

    The same lines have been quoted in the article as well; including the reference to the 1992 letter.

    Growth is undoubtably an important factor in Buffett's investments, and that's because growth is an important factor in Value Investing as originally taught by Benjamin Graham.
    Jun 8, 2015. 11:02 AM | Likes Like |Link to Comment
  • Is Warren Buffett A Value Investor? [View article]
    Thank you, ArtfulDodger.
    It was a pleasure having this discussion with you.

    Each of Graham's strategies was designed for a different type of investor; varying by experience, commitment and mentality (in Graham's own words).

    That's the reason all the "Superinvestor" portfolios look different on the surface, as Buffett explains.

    Graham's various strategies are discussed in "How To Build A Complete Benjamin Graham Portfolio" (http://seekingalpha.co...).

    Best wishes to you too!
    Jun 7, 2015. 12:38 PM | 1 Like Like |Link to Comment
  • 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
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