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  • Buffett Financial Analysis Template: Chicago Bridge And Iron Company [View article]
    Thank you for your comment, Mike Bartlett.

    The last edition of The Intelligent Investor, Buffett's preface and Buffett's article were all written half a century after the great depression.

    CBI doesn't clear any complete set of Graham's rules for Defensive (8 rules), Enterprising (7 rules) or NCAV investment (2 rules). So no Intrinsic value can be assigned as of now.

    Again, as mentioned in the previous comment, this does not mean CBI is necessarily a bad investment. Graham's rules are just extremely selective.

    There are also plenty of stocks that clear Graham's rules even today, as can be seen on Serenity's Graham screeners.

    The article mentioned in Serenity's previous comment examines many of these myths and misconceptions about Graham today, and explains why Graham is still as integral to Finance today as Einstein is to Physics.

    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."

    Warren Buffett concluded "The Superinvestors of Graham-and-Doddsville" writing:
    "Ships will sail around the world but the Flat Earth Society will flourish. There will continue to be wide discrepancies between price and value in the marketplace, and those who read their Graham & Dodd will continue to prosper."

    Thanks again.
    Mar 21, 2015. 04:00 PM | Likes Like |Link to Comment
  • Buffett Financial Analysis Template: Chicago Bridge And Iron Company [View article]
    Warren Buffett describes Benjamin Graham's book - The Intelligent Investor - as "by far the best book about investing ever written" (in its preface, which Buffett wrote).

    Buffett also writes in the preface:
    "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."

    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 - with 17 precise qualitative and quantitative criteria for finding them.
    For advanced investors, Graham described various "special situations".

    Given below are the actual Graham ratings for Chicago Bridge & Iron Company (CBI), 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%.

    Chicago Bridge & Iron Company (CBI) - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 2,520.80%
    Current Assets ÷ [2 x Current Liabilities]: 35.33%
    Net Current Assets ÷ Long Term Debt: 0.00%
    Earnings Stability (100% ⇒ 10 Years): 50.00%
    Dividend Record (100% ⇒ 20 Years): 20.00%
    Earnings Growth (100% ⇒ 30% Growth): 373.79%
    Graham Number ÷ Previous Close: 89.35%

    Not all stocks failing Graham's rules are necessarily bad investments. Graham's rules are just extremely selective. Graham designed and backtested his framework for over 50 years, to deliver the best possible long-term results.

    Even when stocks don't clear them completely, Graham's rules give a clear quantifiable frame of reference for measuring a stock's margin of safety.

    Benjamin Graham is rightly considered the father of value investing. But the term "Value" is often misunderstood to refer to only quantity, and not quality. Most of Graham's actual stock selection rules were concerned with the qualitative assessment of a stock.

    Article: High-Quality Value Investing With Benjamin Graham (http://seekingalpha.co...) has more details.

    Thank you.
    Mar 21, 2015. 11:04 AM | 1 Like Like |Link to Comment
  • Petrobras - Is Bankruptcy Possible? [View article]
    Before being checked against the Graham Number, Benjamin Graham required that a stock first meet six other qualitative criteria for defensive investment.

    For example, given below are all Graham ratings for Petroleo Brasileiro SA Petrobras (PBR).

    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%.

    Petroleo Brasileiro SA Petrobras - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 23,200.00%
    Current Assets ÷ [2 x Current Liabilities]: 74.74%
    Net Current Assets ÷ Long Term Debt: 16.39%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 5.00%
    Earnings Growth (100% ⇒ 30% Growth): 74.74%
    Graham Number ÷ Previous Close: 636.67%

    Please note that not all stocks failing Graham's rules are necessarily bad investments. Graham's rules are just extremely selective. Graham designed and backtested his framework for over 50 years, to deliver the best possible long-term results.

    Even when stocks don't clear them completely, Graham's rules give a clear quantifiable frame of reference for measuring a stock's margin of safety.

    Warren Buffett once wrote a lengthy article explaining how Graham's principles are everlasting, and how Graham's record of creating exceptional investors (such as Buffett himself) is unquestionable. The article is called "The Superinvestors of Graham-and-Doddsville".

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

    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 - with 17 precise qualitative and quantitative rules for finding them (the Graham Number is the quantitative price calculation for Defensive quality stocks).
    For advanced investors, Graham described various "special situations".

    Benjamin Graham is rightly considered the father of value investing. But the term "Value" is often misunderstood to refer to only quantity, and not quality. Most of Graham's actual stock selection rules were concerned with the qualitative assessment of a stock.

    Article: High-Quality Value Investing With Benjamin Graham (http://seekingalpha.co...) has more details.

    Thank you.
    Mar 20, 2015. 05:10 PM | 3 Likes Like |Link to Comment
  • Procter & Gamble Continuing To Unlock Value Within Non-Performing Assets [View article]
    Given below are the Benjamin Graham ratings for The Procter & Gamble Company (PG), 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 Procter & Gamble Company - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 16,427.20%
    Current Assets ÷ [2 x Current Liabilities]: 46.87%
    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): 106.42%
    Graham Number ÷ Previous Close: 57.14%

    While P&G scores well on other fronts, it seems to lag on the Current Asset front; probably a good area to attempt an increase in value for shareholders. That and increased revenues could actually push P&G to Defensive quality Graham stock.

    Benjamin Graham 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 wrote a lengthy article explaining how Graham's principles are everlasting, and how Graham's record of creating exceptional investors (such as Buffett himself) is unquestionable. The article is called "The Superinvestors of Graham-and-Doddsville".

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

    Article: High-Quality Value Investing With Benjamin Graham (http://seekingalpha.co...) has more details.

    A similar Graham analysis of the Duracell unit would probably shed more light on sale to Warren Buffett's Berkshire Hathaway as well.
    Mar 20, 2015. 07:28 AM | Likes Like |Link to Comment
  • Why Super Investor Warren Buffett Is Probably Not Interested In Heineken [View article]
    Have you tried analyzing Heineken using Benjamin Graham's Value Investing rules?

    Benjamin Graham 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 wrote a lengthy article explaining how Graham's principles are everlasting, and how Graham's record of creating exceptional investors (such as Buffett himself) is unquestionable. The article is called "The Superinvestors of Graham-and-Doddsville".

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

    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 - with 17 precise qualitative and quantitative criteria for finding them.
    For advanced investors, Graham described various "special situations".

    Article: High-Quality Value Investing With Benjamin Graham (http://seekingalpha.co...) has more details.

    A complete Graham analysis would probably be a great indication of whether Buffett would be interested in Heineken or not.
    Mar 20, 2015. 07:13 AM | 1 Like Like |Link to Comment
  • Aflac Is Undervalued In This Hot Market: Don't Buck The Duck [View article]
    Presumably, the above formula is derived from the following formula mentioned by Graham:

    Intrinsic Value = EPS x (8.5 + 2xGrowth)

    Benjamin Graham actually gave several warnings about this formula and only mentioned it briefly to demonstrate why growth-based valuations are unreliable. But due to a printing omission in recent editions of The Intelligent Investor, this formula is sometimes mistakenly used today instead of Graham's actual (and more thorough) methods.

    Article 1: Analysts Continue To Use Wrong Benjamin Graham Formula (http://seekingalpha.co...) discusses the issue in detail.

    In fact, most of what Graham actually taught has either been forgotten today, or is applied inaccurately.

    Warren Buffett once wrote a lengthy article explaining how Graham's principles are everlasting, and how Graham's record of creating exceptional investors (such as Buffett himself) is unquestionable. The article is called "The Superinvestors of Graham-and-Doddsville".

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

    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 - with 17 precise qualitative and quantitative criteria for finding them.
    For advanced investors, Graham described various "special situations".

    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 (AFL) - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 4,545.60%
    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: 23.27%

    Not all stocks failing Graham's rules are necessarily bad investments. Graham's rules are just extremely selective. Graham designed and backtested his framework for over 50 years, to deliver the best possible long-term results.

    Even when stocks don't clear them completely, Graham's rules give a clear quantifiable frame of reference for measuring a stock's margin of safety.

    Benjamin Graham is rightly considered the father of value investing. But the term "Value" is often misunderstood to refer to only quantity, and not quality. Most of Graham's actual stock selection rules were concerned with the qualitative assessment of a stock.

    Article 2: High-Quality Value Investing With Benjamin Graham (http://seekingalpha.co...) has more details.

    Thank you.
    Mar 19, 2015. 07:25 AM | 3 Likes Like |Link to Comment
  • ModernGraham Quarterly Valuation Of Danaher Corporation [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 about this formula and only mentions it briefly to demonstrate why growth-based valuations are unreliable. But due to a printing omission in recent editions of The Intelligent Investor, this formula is sometimes mistakenly used today instead of Graham's actual (and more thorough) methods.

    Article 1: Analysts Continue To Use Wrong Benjamin Graham Formula (http://seekingalpha.co...) discusses the issue in detail.

    In fact, most of what Graham actually taught has been forgotten today, or is applied inaccurately.

    Another example from 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 criterion. Checking for Market Capitalization instead of Sales will - all else being equal - rate overvalued stocks higher than undervalued ones.

    Other rules mentioned here too - such as dividend record, and PE & PB ratios - are very different from what Graham actually recommended.

    Given below are the actual Graham ratings for Danaher Corp (DHR), 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%.

    Danaher Corp - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 3,982.80%
    Current Assets ÷ [2 x Current Liabilities]: 87.39%
    Net Current Assets ÷ Long Term Debt: 118.61%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 75.00%
    Earnings Growth (100% ⇒ 30% Growth): 154.69%
    Graham Number ÷ Previous Close: 60.78%

    The Final Graham Assessment for Danaher Corp is also given below.
    The Quantitative Result (Intrinsic Value ÷ Previous Close) for a stock has to be 100% for true Graham investment.

    Danaher Corp - Final Graham Assessment
    Defensive Price (Graham Number): $52.44
    Enterprising Price (Serenity Number): $0.00
    NCAV Price: $-5.84
    Qualitative Result: Good / Enterprising
    Intrinsic Value: $0.00
    Previous Close: $86.27
    Quantitative Result: 0.00%

    Please note that not all stocks failing Graham's rules are necessarily bad investments. Graham's rules are just extremely selective. Graham designed and backtested his framework for over 50 years, to deliver the best possible long-term results.

    Even when stocks don't clear them completely, Graham's rules give a clear and quantifiable frame of reference for measuring a stock's margin of safety.

    Benjamin Graham is rightly considered the father of value investing. But the term "Value" is often misunderstood to refer to only quantity, and not quality. Most of Graham's actual stock selection rules were concerned with the qualitative assessment of a stock.

    Article 2: High-Quality Value Investing With Benjamin Graham (http://seekingalpha.co...) has more details.

    Thank you.
    Mar 18, 2015. 06:48 AM | Likes Like |Link to Comment
  • Is Friedman Industries A Bargain? [View article]
    Incidentally, Benjamin Graham also recommended that a Net Current Asset Value (or NCAV) stock have a positive EPS figure to be eligible for investment.

    Warren Buffett describes Graham's book - The Intelligent Investor - as "by far the best book about investing ever written" (in its preface, which Buffett wrote). Graham recommended various categories of stocks in The Intelligent Investor, and specified precise qualitative and quantitative rules for each category.

    Given below are the Graham ratings for Friedman Industries, Inc (FRD), from last year.

    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%.

    Friedman Industries, Inc (FRD) - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 27.29%
    Current Assets ÷ [2 x Current Liabilities]: 261.38%
    Net Current Assets ÷ Long Term Debt: 100.00%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 81.60%
    Graham Number ÷ Previous Close: 107.07%

    Please note that not all stocks failing Graham's rules are necessarily bad investments. Graham's rules are just extremely selective. Graham designed and backtested his framework for over 50 years, to deliver the best possible long-term results.

    Even when stocks don't clear them completely, Graham's rules give a clear quantifiable frame of reference for measuring a stock's margin of safety.

    Article: High-Quality Value Investing With Benjamin Graham (http://seekingalpha.co...) has more details.

    Thank you.
    Mar 17, 2015. 05:20 PM | Likes Like |Link to Comment
  • Old Tricks: Benjamin Graham Still Works [View article]
    Have you tried Serenity's stock screeners? You can use them to select stocks by various combinations of Graham's Defensive, Enterprising and NCAV criteria.
    Mar 17, 2015. 02:06 PM | Likes Like |Link to Comment
  • Is Biglari The Next Berkshire? Think Again [View article]
    Benjamin Graham 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 wrote a lengthy article explaining how Graham's principles are everlasting, and how Graham's record of creating exceptional investors (such as Buffett himself) is unquestionable. The article is called "The Superinvestors of Graham-and-Doddsville".

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

    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 - with 17 precise qualitative and quantitative criteria for finding them.
    For advanced investors, Graham described various "special situations".

    Given below are the actual Graham ratings for Biglari Holdings Inc (BH), 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%.

    Biglari Holdings Inc - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 158.76%
    Current Assets ÷ [2 x Current Liabilities]: 82.43%
    Net Current Assets ÷ Long Term Debt: 23.26%
    Earnings Stability (100% ⇒ 10 Years): 60.00%
    Dividend Record (100% ⇒ 20 Years): 0.00%
    Earnings Growth (100% ⇒ 30% Growth): 201.04%
    Graham Number ÷ Previous Close: 127.45%

    Please note that not all stocks failing Graham's rules are necessarily bad investments. Graham's rules are just extremely selective. Graham designed and backtested his framework for over 50 years, to deliver the best possible long-term results.

    Even when stocks don't clear them completely, Graham's rules give a clear quantifiable frame of reference for measuring a stock's margin of safety.

    Article: High-Quality Value Investing With Benjamin Graham (http://seekingalpha.co...) has more details.

    Thank you.
    Mar 17, 2015. 06:33 AM | Likes Like |Link to Comment
  • One Of Europe's Finest, Why Swiss Food Giant Nestlé Is A Must Have For Every Investment Portfolio [View article]
    Warren Buffett is the man who said "Be fearful when others are greedy and greedy only when others are fearful."

    Wouldn't that go against investing in something that's selling at a record high share price?
    Mar 16, 2015. 04:31 PM | Likes Like |Link to Comment
  • Old Tricks: Benjamin Graham Still Works [View article]
    Nice description of Graham's criteria for Defensive investment.

    Graham himself gave several different variations of these rules for investors of different types.

    Summarized from Chapter 15 of The Intelligent Investor - Stock Selection for the Enterprising Investor:
    [Note: For issues selling at P/E multipliers under 10]
    1-A. Current assets at least 1 1⁄2 times current liabilities.
    1-B. Debt not more than 110% of net current assets.
    2. Earnings stability: No deficit in the last five years covered in the Stock Guide.
    3. Dividend record: Some current dividend.
    4. Earnings growth: Last year's earnings more than those of 1966.
    [Note: Corresponds to the earnings of 5 years ago]
    5. Price: Less than 120% net tangible assets.

    Warren Buffett once wrote a lengthy article explaining how Graham's principles are everlasting, and how Graham's record of creating exceptional investors (such as Buffett himself) is unquestionable. The article is called "The Superinvestors of Graham-and-Doddsville".

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

    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 - with 17 precise qualitative and quantitative criteria for finding them.
    For advanced investors, Graham described various "special situations".

    Benjamin Graham is rightly considered the father of value investing. But the term "Value" is often misunderstood to refer to only quantity, and not quality. Most of Graham's actual stock selection rules were concerned with the qualitative assessment of a stock.

    Article: High-Quality Value Investing With Benjamin Graham (http://seekingalpha.co...) has more details.

    Thank you.
    Mar 16, 2015. 04:15 PM | Likes Like |Link to Comment
  • Berkshire: Is Now A Good Time To Buy? [View article]
    To add to Mark_A's comment above:

    Benjamin Graham's first recommended investment strategy was to invest in Index stocks. Graham even pointed out that the S&P500 tends to outperform the Dow.

    Serenity's own 2+ year old article (link given below) recommends a Vanguard S&P500 index fund as a good application of Graham's first strategy for casual investors.

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

    For advanced investors, Graham described various "special situations".

    Warren Buffett once wrote a lengthy article explaining how Graham's principles are everlasting, and how Graham's record of creating exceptional investors (such as Buffett himself) is unquestionable. The article is called "The Superinvestors of Graham-and-Doddsville".

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

    Benjamin Graham is rightly considered the father of value investing. But the term "Value" is often misunderstood to refer to only quantity, and not quality. Most of Graham's actual stock selection rules were concerned with the qualitative assessment of a stock.

    Article: How To Build A Complete Benjamin Graham Portfolio (http://seekingalpha.co...) has more details.
    Mar 16, 2015. 03:41 PM | Likes Like |Link to Comment
  • The Investment Case For Gold Resource Corp.: A Minority Report [View article]
    Thank you, Adem Tumerkan.
    Mar 16, 2015. 03:30 PM | 1 Like Like |Link to Comment
  • Berkshire: Is Now A Good Time To Buy? [View article]
    The actual quote is:
    "In the business world, the rearview mirror is always clearer than the windshield."

    Means something entirely different.
    Mar 16, 2015. 03:26 PM | 3 Likes Like |Link to Comment
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