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  • The Intelligent Investor By Benjamin Graham [View instapost]
    That's a great suggestion, tyouth.

    In fact, Graham already recommends such a method for Defensive quality stocks.

    "6. Current price should not be more than 15 times average earnings of the past three years."
    Stock Selection for the Defensive Investor - Chapter 14, The Intelligent Investor

    This averaging is already included in serenitystocks' calculation of the Graham Number.

    For Enterprising quality stocks however, Graham only recommends a multiplier of 10 and so serenitystocks uses only the latest EPS value for calculation of the Serenity Number.

    Thank you for your thoughtful comment.
    Mar 16, 2015. 08:36 AM | Likes Like |Link to Comment
  • The Importance Of How To Invest, Not What To Invest [View article]
    > I've shown and proven what Graham's line of thought
    > seems like you are part of another sect

    A casual reader may find your show of confidence - and ad hominem attacks - convincing, Jae Jun.

    The Graham references and scans in Serenity's articles are all publicly available. Interested readers are encouraged to look them up and make up their own minds.

    Thank you.
    Mar 15, 2015. 08:39 AM | 1 Like Like |Link to Comment
  • The Importance Of How To Invest, Not What To Invest [View article]
    "I never said Buffett has nothing of use to the ordinary investor"

    You didn't, Mark_A.
    The article says that, hence the original comment.

    "buying companies with a 20 year plus history of paying dividends"

    Graham recommended that for Defensive quality stocks, along with 7 other rules. For Enterprising quality stocks, he required just 1 year of dividends and 6 other rules. For NCAV quality stocks, he required no dividends but specified 2 other rules.

    For advanced investors such as Buffett, he described various "special situations". For casual investors, he recommended Index stocks.

    Article 1: How To Build A Complete Benjamin Graham Portfolio (http://seekingalpha.co...) has more details.

    What Graham did NOT recommend is the following formula:

    Intrinsic Value = EPS x (8.5 + 2xGrowth)

    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 often mistakenly used today instead of Graham's actual (and more thorough) methods.

    Article 2: Analysts Continue To Use Wrong Benjamin Graham Formula (http://seekingalpha.co...) discusses the issue in detail.

    Unfortunately, there is more misinformation about Graham today than information.

    Please read Graham's books to see exactly what he said.
    The above articles quote specific pages from his books, with screenshots where necessary.

    Buffett has always recommended, followed, and continues to follow what Graham taught. That includes recommending Index funds for less involved investors.
    Mar 14, 2015. 11:34 AM | 1 Like Like |Link to Comment
  • The Importance Of How To Invest, Not What To Invest [View article]
    Thank you, Mark_A.

    Serenity's own 2+ year old article (http://seekingalpha.co...) recommends a Vanguard S&P500 index fund as a good application of Graham's first strategy for ordinary investors.

    There really is no ambiguity here, and nothing is out-of-date.
    Buffett is simply outlining an application of Graham's principles.

    You can follow Buffett or Graham.
    Your results will be similar.

    Graham lays out the principles.
    Buffett provides an application.

    "The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate."
    Introduction, The Intelligent Investor

    But to say Buffett said nothing of use to the ordinary investor is just plain wrong.
    Buffett has spelled it out multiple times - read Graham and apply.
    Mar 14, 2015. 03:17 AM | 1 Like Like |Link to Comment
  • The Importance Of How To Invest, Not What To Invest [View article]
    Thank you for your comment, Mark_A.

    Benjamin Graham's first recommended strategy was to invest in Index stocks, if one didn't have the time for detailed stock analysis.

    Graham even pointed out that the S&P500 tends to outperform the Dow.

    Serenity's articles have highlighted this fact, and recommend index funds (preferably an S&P500 one) as the first Graham strategy.

    Buffett is just explaining a Graham principle. He states very clearly that Graham's principles are everlasting.
    Mar 14, 2015. 01:27 AM | 2 Likes Like |Link to Comment
  • Is One Of Warren Buffett's Portfolio Holdings A Compelling Short? [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 recommended various categories of stocks in The Intelligent Investor, and specified precise qualitative and quantitative rules for each category.

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

    USG Corp - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 744.80%
    Current Assets ÷ [2 x Current Liabilities]: 102.31%
    Net Current Assets ÷ Long Term Debt: 26.71%
    Earnings Stability (100% ⇒ 10 Years): 20.00%
    Dividend Record (100% ⇒ 20 Years): 0.00%
    Earnings Growth (100% ⇒ 30% Growth): 10.33%
    Graham Number ÷ Previous Close: 17.00%

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

    USG Corp - Final Graham Assessment
    Defensive Price (Graham Number): $4.67
    Enterprising Price (Serenity Number): $2.96
    NCAV Price: -$16.87
    Qualitative Result: Bargain / NCAV
    Intrinsic Value: $0.00
    Previous Close: $27.48
    Quantitative Result: 0.00%

    USG does appear to be overvalued by Graham's metrics. But here's what Graham himself wrote about Short Selling:
    "selling short a too popular and therefore overvalued issue is apt to be a test not only of one’s courage and stamina but also of the depth of one’s pocketbook. The principle is sound, its successful application is not impossible, but it is distinctly not an easy art to master."

    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 13, 2015. 05:03 PM | 1 Like Like |Link to Comment
  • The Importance Of How To Invest, Not What To Invest [View article]
    Buffett actually gives very clear actionable advice for ordinary investors.

    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.

    Buffett describes 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."

    Buffett also explains - in the "Legacy of Benjamin Graham" video - how Graham was completely focussed on refining methods that ordinary investors could apply to achieve results similar to his own (Grahams's).

    Graham recommends various categories of stocks in The Intelligent Investor, and specifies precise qualitative and quantitative rules for each category.

    Article 1: High-Quality Value Investing With Benjamin Graham (http://seekingalpha.co...) has more details.

    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 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."

    Article 2: Analysts Continue To Use Wrong Benjamin Graham Formula (http://seekingalpha.co...) shows one example of how well the Flat Earth Society flourishes to this day.

    And those who read their Graham & Dodd, continue to prosper.

    Thank you.
    Mar 13, 2015. 04:36 PM | Likes Like |Link to Comment
  • ModernGraham Quarterly Valuation Of Texas Instruments [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 Texas Instruments Inc (TXN), 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%.

    Texas Instruments Inc - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 2,609.00%
    Current Assets ÷ [2 x Current Liabilities]: 145.91%
    Net Current Assets ÷ Long Term Debt: 140.24%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 76.92%
    Graham Number ÷ Previous Close: 37.20%

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

    Texas Instruments Inc - Final Graham Assessment
    Defensive Price (Graham Number): $21.29
    Enterprising Price (Serenity Number): $11.08
    NCAV Price: $0.40
    Qualitative Result: Good / Enterprising
    Intrinsic Value: $11.08
    Previous Close: $57.22
    Quantitative Result: 19.36%

    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 13, 2015. 04:17 PM | 2 Likes Like |Link to Comment
  • The Millennial Portfolio: Tracking A Virtual Portfolio 'Invested In What We Know' [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".

    Two of Graham's quotes come to mind here:
    1. "While enthusiasm may be necessary for great accomplishments elsewhere, on Wall Street it almost invariably leads to disaster."
    2. "Operations for profit should be based, not on optimism, but on arithmetic."

    An analysis of a stock should therefore include at least cursory look at the company's underlying numbers.

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

    For example, given below are the actual Graham ratings for Apple Inc (AAPL), 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%.

    Apple Inc (AAPL) - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 39,960.00%
    Current Assets ÷ [2 x Current Liabilities]: 54.01%
    Net Current Assets ÷ Long Term Debt: 17.54%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 20.00%
    Earnings Growth (100% ⇒ 30% Growth): 1,243.48%
    Graham Number ÷ Previous Close: 41.36%

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

    Thank you.
    Mar 11, 2015. 10:13 AM | 2 Likes Like |Link to Comment
  • Time To Look At Emerging Markets 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). In The Intelligent Investor, Graham recommended various categories of stocks and specified precise qualitative and quantitative rules for each category.

    Given below are the actual Graham ratings for Itau Unibanco Holding SA (ITUB), 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%.

    Itau Unibanco Holding SA - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 5,281.80%
    Current Assets ÷ [2 x Current Liabilities]: 0.39%
    Net Current Assets ÷ Long Term Debt: 0.00%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 70.00%
    Earnings Growth (100% ⇒ 30% Growth): 111.37%
    Graham Number ÷ Previous Close: 13.59%

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

    Thank you.
    Mar 11, 2015. 09:56 AM | Likes Like |Link to Comment
  • General Motors: What More Do Investors Want? [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). In The Intelligent Investor, Graham recommended various categories of stocks and specified precise qualitative and quantitative rules for each category.

    The last of Graham's 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.

    Buffett's transactions usually fall in this "Special Situations" category. His holdings are thus not necessarily a good indication of what's good for the rest of us.

    Buffett himself explains - in the "Legacy of Benjamin Graham" video - how Graham was completely focussed on refining methods that ordinary investors could apply to achieve results similar to his own (Grahams's).

    Given below are the actual Graham ratings for General Motors Co (GM), 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%.

    General Motors Co - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 31,180.00%
    Current Assets ÷ [2 x Current Liabilities]: 63.67%
    Net Current Assets ÷ Long Term Debt: 56.41%
    Earnings Stability (100% ⇒ 10 Years): 60.00%
    Dividend Record (100% ⇒ 20 Years): 5.00%
    Earnings Growth (100% ⇒ 30% Growth): 0.00%
    Graham Number ÷ Previous Close: 94.12%

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

    Thank you.
    Mar 10, 2015. 04:30 PM | Likes Like |Link to Comment
  • Valuable Lessons From Warren Buffett's 2014 Letter To Shareholders [View article]
    Sad but true, six!
    In fact, the misuse goes beyond just quotes.

    How many times have we seen someone recommend the "latest Benjamin Graham stocks" with this formula?

    Intrinsic Value = EPS x (8.5 + 2xGrowth)

    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 now used more often than Graham's actual (and more thorough) methods.

    Article: Analysts Continue To Use Wrong Benjamin Graham Formula (http://seekingalpha.co...) discusses the issue in detail.
    Mar 10, 2015. 02:00 PM | Likes Like |Link to Comment
  • Valuable Lessons From Warren Buffett's 2014 Letter To Shareholders [View article]
    Warren Buffett once wrote a lengthy article explaining how Benjamin 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".

    On the subject of being one's own worst enemy, Graham wrote:

    "We shall say quite a bit about the psychology of investors. For indeed, the investor’s chief problem—and even his worst enemy—is likely to be himself."
    Introduction, The Intelligent Investor

    "We have seen much more money made and kept by “ordinary people” who were temperamentally well suited for the investment process than by those who lacked this quality, even though they had an extensive knowledge of finance, accounting, and stock-market lore."
    Introduction, The Intelligent Investor

    There's good reason why Buffett calls The Intelligent Investor "by far the best book about investing ever written". Graham doesn't miss anything.

    In The Intelligent Investor, Graham recommended various categories of stocks and specified precise qualitative and quantitative rules for each category.

    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 8, 2015. 05:51 PM | Likes Like |Link to Comment
  • ModernGraham Quarterly Valuation Of V.F. 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 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): 2,456.40%
    Current Assets ÷ [2 x Current Liabilities]: 123.82%
    Net Current Assets ÷ Long Term Debt: 162.23%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 95.00%
    Earnings Growth (100% ⇒ 30% Growth): 162.82%
    Graham Number ÷ Previous Close: 36.80%

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

    VF Corp - Final Graham Assessment
    Defensive Price (Graham Number): $27.41
    Enterprising Price (Serenity Number): $8.56
    NCAV Price: $-0.79
    Qualitative Result: Good / Enterprising
    Intrinsic Value: $8.56
    Previous Close: $74.49
    Quantitative Result: 11.49%

    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 8, 2015. 04:26 PM | Likes Like |Link to Comment
  • ModernGraham Quarterly Valuation Of Wynn Resorts Limited [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 Wynn Resorts Ltd (WYNN), 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%.

    Wynn Resorts Ltd - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 1,086.80%
    Current Assets ÷ [2 x Current Liabilities]: 0.00%
    Net Current Assets ÷ Long Term Debt: 0.00%
    Earnings Stability (100% ⇒ 10 Years): 90.00%
    Dividend Record (100% ⇒ 20 Years): 35.00%
    Earnings Growth (100% ⇒ 30% Growth): 113.91%
    Graham Number ÷ Previous Close: 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 8, 2015. 04:22 PM | 1 Like Like |Link to Comment
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