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  • 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
  • Analysts Continue To Use Wrong Benjamin Graham Formula [View article]
    Graham only gives these warnings for this formula, Jae Jun.
    He strongly recommends the formulas in the Stock Selection chapters: http://seekingalpha.co...

    Thank you!
    Sep 24 06:22 AM | Likes Like |Link to Comment
  • Analysts Continue To Use Wrong Benjamin Graham Formula [View article]
    Thank you, Varan.
    The intent was not to prove anyone wrong anyway.

    But vague definitions are dangerous territory. Success, Failure, Profits, Losses and Bankruptcy are all terms that need not be precisely defined.
    Sep 24 01:59 AM | 1 Like Like |Link to Comment
  • Analysts Continue To Use Wrong Benjamin Graham Formula [View article]
    Thank you for your comment, Jae Jun.

    The phrases "for illustrative purposes only" and "Let the reader not be misled into thinking that such projections have any high degree of reliability" are from the Warning note.
    The phrase "we do not suggest that this formula gives the true value of a growth stock" is from the Foot Note.

    All 3 are quite unambiguous.
    Sep 24 01:58 AM | Likes Like |Link to Comment
  • Analysts Continue To Use Wrong Benjamin Graham Formula [View article]
    "(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."

    This is just one of Graham's references to IBM's high evaluations from his 1973 edition of "The Intelligent Investor", wdjax0n.

    IBM currently has a reported book value of $17.22 but a Tangible Book Value of only (negative) -$12.69.

    IBM is ungraded on Serenity because it simply does not meet any of Graham's investment criteria.
    Sep 23 11:37 PM | Likes Like |Link to Comment
  • Tweaking Benjamin Graham's Stock Selection Criteria [View article]
    Hello frrizzo380,

    Thank you for your comment!
    HollyFrontier Corporation (HFC) has paid dividends from 1994 to 2013.
    Sep 23 11:35 PM | Likes Like |Link to Comment
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