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  • Pepsico, Inc. Dividend Stock Analysis [View article]
    Graham actually recommended 3 different types of stocks for investment - Defensive, Enterprising and NCAV - and 16 criteria for finding them.

    Given below are each of the individual ratings for Benjamin Graham's Defensive criteria for PepsiCo Inc (PEP):
    (a rating above 100% indicates that the stock clears that criteria).

    Sales: 13,098.00%
    Assets / Liabilities: 54.77%
    Assets / Debt: 6.93%
    Earnings Stability: 100.00%
    Dividend Record: 100.00%
    Earnings Growth: 131.26%
    Graham Number / Price: 0.00%

    Thus, PepsiCo Inc clears all Defensive criteria expect those for Assets, Liabilities and EPS/Book-Value.

    The final Graham result for PepsiCo Inc is:

    Defensive Price (Graham Number): $0.00
    Enterprising Price: -$8.62
    NCAV Price: -$21.70
    Graham Grade: Ungraded
    Graham Price: $0.00
    Current Price: $84.39
    Nov 27 12:18 AM | Likes Like |Link to Comment
  • S&P 500 Best Dividend Stocks According To Graham Principles [View article]
    Benjamin Graham recommended 3 different types of stocks for investment - Defensive, Enterprising and NCAV - and 16 criteria for finding them.

    Doing a complete Graham analysis for the above three stocks, we get:

    Helmerich & Payne Inc
    Reported Book Value: $39.26
    Tangible Book Value: $36.28
    Defensive Price (Graham Number): $68.21
    Enterprising Price: $43.54
    NCAV Price: -$9.37
    Graham Grade: Excellent / Defensive
    Graham Price: $68.21
    Current Price: $78.06

    Joy Global Inc
    Reported Book Value: $25.54
    Tangible Book Value: $5.72
    Defensive Price (Graham Number): $30.29
    Enterprising Price: $6.86
    NCAV Price: -$3.86
    Graham Grade: Good / Enterprising
    Graham Price: $6.86
    Current Price: $56.72

    National Oilwell Varco Inc
    Reported Book Value: $48.22
    Tangible Book Value: $19.50
    Defensive Price (Graham Number): $49.48
    Enterprising Price: $23.40
    NCAV Price: $10.38
    Graham Grade: Good / Enterprising
    Graham Price: $23.40
    Current Price: $83.56

    Also given below are the individual ratings for each of Graham's defensive criteria for the above three stocks (a rating above 100% indicates that the stock clears that criteria).

    Helmerich & Payne Inc
    Sales: 630.00%
    Assets / Liabilities: 117.43%
    Assets / Debt: 263.63%
    Earnings Stability: 100.00%
    Dividend Record: 100.00%
    Earnings Growth: 518.08%

    Joy Global Inc
    Sales: 1,132.00%
    Assets / Liabilities: 88.61%
    Assets / Debt: 105.25%
    Earnings Stability: 100.00%
    Dividend Record: 55.00%
    Earnings Growth: 630.26%

    National Oilwell Varco Inc
    Sales: 4,008.00%
    Assets / Liabilities: 138.77%
    Assets / Debt: 318.58%
    Earnings Stability: 100.00%
    Dividend Record: 25.00%
    Earnings Growth: 515.59%
    Nov 15 03:39 PM | Likes Like |Link to Comment
  • Raytheon Dividend Stock Analysis [View article]
    To be checked against the Graham Number, Benjamin Graham required that a stock first have uninterrupted earnings for the previous 10 years, uninterrupted dividends for the previous 20 years, and meet 4 other Defensive criteria.

    And in addition to the criteria for Defensive stocks, Graham also specified separate sets of criteria for Enterprising and NCAV stocks - http://seekingalpha.co...
    Nov 15 06:22 AM | Likes Like |Link to Comment
  • ModernGraham Valuation Of 3M [View article]
    Hello Benjamin Clark,

    Benjamin Graham backtested his criteria for up to 50 years before recommending them.
    Is it really a good idea to modify them so much?

    Graham also gave some additional criteria to the ones listed here.
    For Defensive stocks, Graham also required "2-B. Long-term debt should not exceed the net current assets."
    And for Enterprising stocks, he required "Price: Less than 120% net tangible assets. [For issues selling at P/E multipliers under 10]"

    More Details: "How To Build A Complete Benjamin Graham Portfolio"
    http://seekingalpha.co...

    Doing an analysis for 3M (MMM) with Graham's unmodified criteria, we get:

    Defensive Price (Graham Number): $41.43
    Enterprising Price: $14.44
    NCAV Price: -$3.89
    Graham Grade: Excellent / Defensive
    Graham Price: $41.43
    Current Price: $124.92 (Overvalued)

    (3M has a Tangible Book Value of only $12.03).

    Also given below is a percentage rating by each of Graham's Defensive criteria for 3M.
    For Defensive Graham investment, all the below ratings need to be at least 100%.

    Sales: 5,980.00% (Inflation Adjusted)
    Assets / Liabilities: 109.92%
    Assets / Debt: 148.99%
    Earnings Stability: 100.00%
    Dividend Record: 100.00%
    Earnings Growth: 127.52%

    Source:
    serenitystocks.com
    Oct 30 03:07 AM | Likes Like |Link to Comment
  • A Winning Dividend Portfolio According To Graham Principles [View article]
    Hello Arie Goren,

    Is this analysis based on Benjamin Graham's Enterprising Criteria?
    In that case, shouldn't it also include a "PE of not more than 10" and a "Price less than 120% net tangible assets"?

    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: This corresponds approximately to the earnings of 2008 today]
    5. Price: Less than 120% net tangible assets.

    More details: http://seekingalpha.co...
    "Tweaking Benjamin Graham's Stock Selection Criteria"
    Oct 23 04:47 PM | Likes Like |Link to Comment
  • International Business Machines Corp. Dividend Stock Analysis [View article]
    Given below is one of Benjamin Graham's references to IBM's high evaluations from the 1973 edition of his book "The Intelligent Investor":

    "(new, low-quality stocks) quickly find buyers; their prices are often bid up enthusiastically right after issuance to levels in relation to assets and earnings that would put IBM, Xerox, and Polaroid to shame. Wall Street takes this madness in its stride, with no overt efforts by anyone to call a halt before the inevitable collapse in prices."

    IBM currently has a reported book value of $17.22 but a Tangible Book Value of only (negative) -$12.69. Thus IBM is does not meet any of Graham's investment criteria and is ungraded on Serenity.

    Also given below is the percentage rating for IBM by each of Graham's Defensive criteria.
    Sales: 20,902.00%
    Assets / Liabilities: 56.66%
    Assets / Debt: 24.11%
    Earnings Stability: 100.00%
    Dividend Record: 100.00%
    Earnings Growth: 229.48%

    Source:
    serenitystocks.com
    Oct 21 11:06 PM | 1 Like Like |Link to Comment
  • How To Build A Complete Benjamin Graham Portfolio [View article]
    Thank you, nothingveryclever!
    Oct 13 04:13 PM | Likes Like |Link to Comment
  • How To Build A Complete Benjamin Graham Portfolio [View article]
    Hello imklevr,

    These screens are from the Serenity Stocks website - serenitystocks.com

    These screenshots were taken before Serenity was last upgraded. The new website looks a little different but has all the same features, plus a little more.
    Oct 13 04:12 PM | Likes Like |Link to Comment
  • Invest In Stocks With A Margin Of Safety To Reduce Risk And Enhance Returns [View article]
    The evaluation of intangibles is, at best, a highly imperfect science.
    Here is what Graham himself wrote on the topic:

    "We were not willing to accept the prospects and promises of the future as compensation for a lack of sufficient value in hand. This has by no means been the standard viewpoint among investment authorities; in fact, the majority would probably subscribe to the view that prospects, quality of management, other intangibles, and “the human factor” far out- weigh the indications supplied by any study of the past record, the balance sheet, and all the other cold figures."
    - From "The Intelligent Investor"

    "A generation or more ago it was the standard rule, recognized both in average stock prices and in formal or legal valuations, that intangibles were to be appraised on a more conservative basis than tangibles. ... Essentially the exact reverse of these relationships may now be seen. A company must now typically earn about 10 per cent on its common equity to have it sell in the average market at full book value. But its excess earnings, above 10 per cent on capital, are usually valued more liberally, or at a higher multiplier, than the base earnings required to support the book value in the market. "
    - From "The Intelligent Investor"

    Thus, the best measure of a company's intangibles is its excess of earnings over that possible from its tangible assets alone. And this calculation of a stock's worth from the combination of its tangible assets and its total earnings is already fully accounted for in Graham's stock selection methods.
    Oct 8 11:53 PM | 1 Like Like |Link to Comment
  • Perception And Reality: Focus On Earnings [View article]
    The problem is that most stock evaluations today are done without paying heed to tangible vs intangible assets - or even deliberately ignoring the difference. So in effect, people do end up investing in intangibles when buying stocks following these evaluations.

    And the evaluation of intangibles is, at best, a highly imperfect science. Here is what Graham himself wrote on the topic.

    "We were not willing to accept the prospects and promises of the future as compensation for a lack of sufficient value in hand. This has by no means been the standard viewpoint among investment authorities; in fact, the majority would probably subscribe to the view that prospects, quality of management, other intangibles, and “the human factor” far out- weigh the indications supplied by any study of the past record, the balance sheet, and all the other cold figures."
    - From "The Intelligent Investor"

    "A generation or more ago it was the standard rule, recognized both in average stock prices and in formal or legal valuations, that intangibles were to be appraised on a more conservative basis than tangibles. ... But what has happened since the 1920s? Essentially the exact reverse of these relationships may now be seen. A company must now typically earn about 10 per cent on its common equity to have it sell in the average market at full book value. But its excess earnings, above 10 per cent on capital, are usually valued more liberally, or at a higher multiplier, than the base earnings required to support the book value in the market. "
    - From "The Intelligent Investor"

    Thus, the best measure of a company's intangibles is its excess of earnings over that possible from its tangible assets alone. And this calculation of a stock's worth from the combination of its tangible assets and its total earnings is already fully accounted for in Graham's stock selection methods.
    Details: http://seekingalpha.co...
    Oct 8 11:50 PM | Likes Like |Link to Comment
  • Invest In Stocks With A Margin Of Safety To Reduce Risk And Enhance Returns [View article]
    Hello DJMJ,

    Teva Pharmaceutical Industries (TEVA) has a Reported Book Value of $26.66 but a Tangible Book Value of only -$4.47 (negative). This is why Serenity does not a list positive Graham (Defensive, Enterprising or NCAV) prices for TEVA.

    Apart from Graham's quantitative price calculations, TEVA also does not meet some of Graham's qualitative requirements for investment.

    Below is a percentage rating by each of Graham's Defensive criteria, for TEVA.

    Sales: 4,064.00%
    Assets / Liabilities: 63.45%
    Assets / Debt: 29.60%
    Earnings Stability: 100.00%
    Dividend Record: 100.00%
    Earnings Growth: 170.85%

    For Defensive Graham investment, all the above ratings need to be at least 100%.
    Details: http://seekingalpha.co...

    For Enterprising Graham investment, Assets / Liabilities and Assets / Debt have to be at least 75% and 90% respectively.
    Details: http://seekingalpha.co...

    TEVA might possibly be clearing the simplistic "Benjamin Graham Formula". But note that Graham warned against using that formula and only gave it for illustrative purposes.
    Details: http://seekingalpha.co...
    Oct 7 04:25 AM | Likes Like |Link to Comment
  • Analysts Continue To Use Wrong Benjamin Graham Formula [View article]
    Thank you very much, ArtfulDodger!

    Replying to your observation about Buffett and Graham will require including a few quotes that are lengthy, but insightful.

    Buffett himself says he's 85% Graham and 15% Phil Fisher.
    In his 1984 speech "The Superinvestors of Graham-and-Doddsville", he says:

    "In this group of successful investors that I want to consider, there has been a common intellectual patriarch, Ben Graham.... They have gone to different places and bought and sold different stocks and companies ... I should add that in the records we’ve looked at so far, through- out this whole period there was practically no duplication in these portfolios."

    Also, in the "Legacy of Benjamin Graham" video released by the Heilbrunn Center, Buffett explains that Graham was focussed on refining a method that ordinary investors - without specialized knowledge or access - could apply to achieve the same results as himself.

    Regarding the possibility that Buffett may tout Graham without following him, 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."

    The difference between Graham and Buffett is simply that of principle and application.

    All of Graham's students follow the same principles, they just apply them in their own way. Buffett is simply the most visible of them because he's the wealthiest.

    But large portfolios are simply not a priority to some people.
    Graham himself said in 1976:

    "About six years later, we decided to liquidate Graham-Newman Corporation-to end it primarily because the succession of management had not been satisfactorily established. We felt we had nothing special to look forward to that interested us. We could have built up an enormous business had we wanted to, but we limited ourselves to a maximum of $15 million of capital-only a drop in the bucket these days. The question of whether we could earn the maximum percentage per year was what interested us. It was not the question of total sums, but annual rates of return that we were able to accomplish."
    Oct 6 01:32 AM | 1 Like Like |Link to Comment
  • Now Is The Time To Be Bullish (Part 2): The Domestic Stock Market Analysis [View article]
    Thank you, Morgan!
    Oct 4 01:26 AM | 1 Like Like |Link to Comment
  • Now Is The Time To Be Bullish (Part 2): The Domestic Stock Market Analysis [View article]
    Hello Morgan,

    The Benjamin Graham formula is actually:
    Value = Current (Normal) Earnings X (8.5 "plus" twice the expected annual growth rate)

    And Graham actually strongly discouraged using it.
    For details, please see http://seekingalpha.co...
    Oct 3 10:46 PM | 1 Like Like |Link to Comment
  • 10 Stocks Meeting Benjamin Graham's NCAV Criteria In May [View article]
    Hello frrizzo380,

    This article was written in May.
    At the time, The Diluted Normalized EPS for Books-A-Million, Inc. (BAMM) in the 53 weeks ending 2013-02-02 was $0.21.

    You are advised to always do a Graham analysis with the latest figures (this can be done on Serenity) before making an investment decision.
    Sep 29 12:34 AM | Likes Like |Link to Comment
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