Seeking Alpha

Serenity

 
View as an RSS Feed
View Serenity's Comments BY TICKER:
Latest comments  |  Highest rated
  • Deal Or No Deal: 6 Undervalued Dividend Stocks Trading Below Their Graham Number [View article]
    The Graham-Number Stock Screener on Serenity lists 570 stocks selling under their Graham Numbers today.
    370 of them have paid dividends in the last one year.

    But to be checked against the Graham Number, Benjamin Graham required that a stock first have uninterrupted earnings for the last 10 years, uninterrupted dividends for the last 20 years, and meet 4 other Defensive criteria.

    Given below are the inflation-adjusted Defensive Graham ratings for the above stocks.
    Defensive Graham investment requires all the ratings to be at least 100%.

    AGCO CORPORATION
    Sales: 2,158.00%
    Assets / Liabilities: 80.32%
    Assets / Debt: 181.68%
    Earnings Stability: 70.00%
    Dividend Record: 5.00%
    Earnings Growth: 285.91%
    Graham Number / Price: 100.51%

    BARNES GROUP Inc
    Sales: 218.00%
    Assets / Liabilities: 96.10%
    Assets / Debt: 56.48%
    Earnings Stability: 100.00%
    Dividend Record: 100.00%
    Earnings Growth: 220.85%
    Graham Number / Price: 0.00%

    DEAN FOODS CO.
    Sales: 1,804.00%
    Assets / Liabilities: 73.66%
    Assets / Debt: 41.22%
    Earnings Stability: 20.00%
    Dividend Record: 0.00%
    Earnings Growth: 68.65%
    Graham Number / Price: 90.03%

    ENTRAVISION COMMUNICATION
    Sales: 44.78%
    Assets / Liabilities: 158.26%
    Assets / Debt: 21.09%
    Earnings Stability: 20.00%
    Dividend Record: 15.00%
    Earnings Growth: 0.00%
    Graham Number / Price: 0.00%

    FEDERAL SIGNAL Corp
    Sales: 170.26%
    Assets / Liabilities: 100.11%
    Assets / Debt: 156.91%
    Earnings Stability: 20.00%
    Dividend Record: 0.00%
    Earnings Growth: 135.29%
    Graham Number / Price: 57.14%

    MEADWESTVACO CORP
    Sales: 1,078.00%
    Assets / Liabilities: 105.27%
    Assets / Debt: 100.00%
    Earnings Stability: 90.00%
    Dividend Record: 100.00%
    Earnings Growth: 275.98%
    Graham Number / Price: 97.46%
    Jun 12 01:16 PM | Likes Like |Link to Comment
  • Investing For Beginners With Benjamin Graham [View article]
    To be checked against the Graham Number, Graham required that a stock also meet 6 other Defensive criteria, Profcannon. So the utility of using the Graham Number by itself is debatable.

    Also, do note that the standard assumption that lower EPS/BVPS/Graham Numbers are acceptable for "growth stocks" is antithetical to Graham's principles.
    In fact, for Enterprising investors looking for better results than Defensive investors, Graham actually required stocks to provide even more EPS and BVPS per dollar.
    Jun 12 10:46 AM | Likes Like |Link to Comment
  • Investing For Beginners With Benjamin Graham [View article]
    It's the TBVPS times the EPS, Profcannon.

    Note that the P/E ratio is inversely proportional to the EPS. When one goes up, the other goes down (for a given price).

    So yes, lower PEs are better.
    And higher EPS values and higher BVPS values are preferable.
    Jun 12 10:23 AM | Likes Like |Link to Comment
  • Analysts Continue To Use Wrong Benjamin Graham Formula [View article]
    As far as Buffett's holdings go, wdjax0n:

    Most of Buffett's operations come under what Graham classified as "Special Situations", advanced investments not suitable for the ordinary investor. Buffett makes institutional deals with prices and benefits that most people cannot.
    Jun 11 10:00 AM | Likes Like |Link to Comment
  • Investing For Beginners With Benjamin Graham [View article]
    Thank you, jlalbalos!
    If you have any questions, please don't hesitate to ask.

    The below article also shows how Graham's teachings are often wrongly interpreted. Please watch out for such oversimplified methods.
    http://seekingalpha.co...
    Jun 11 09:43 AM | Likes Like |Link to Comment
  • Investing For Beginners With Benjamin Graham [View article]
    You're welcome, cbama12495!

    If you have any questions on how the Graham analysis and screening is done, please don't hesitate to ask.
    Jun 11 09:24 AM | Likes Like |Link to Comment
  • 6 Elite Companies In The Spotlight This Week [View article]
    Given below are the inflation-adjusted Graham Defensive ratings for the above stocks.
    For stocks with a positive NCAV, the NCAV and current price are also mentioned.

    Defensive Graham investment requires all the ratings to be at least 100%.
    Enterprising Graham investment requires the ratings to be at least:
    Assets / Liabilities: 75%
    Assets / Debt: 90%
    Earnings Stability: 50%
    Dividend Record: 5%
    Graham Number / Price: 137%

    AFLAC Inc
    Sales: 4,788.00%
    Assets / Liabilities: 0.00%
    Assets / Debt: 0.00%
    Earnings Stability: 100.00%
    Dividend Record: 100.00%
    Earnings Growth: 157.16%
    Graham Number / Price: 107.83%

    INTUITIVE SURGICAL Inc
    Sales: 454.00%
    Assets / Liabilities: 253.66%
    Assets / Debt: 100.00%
    Earnings Stability: 100.00%
    Dividend Record: 0.00%
    Earnings Growth: 607.21%
    Graham Number / Price: 43.34%
    NCAV Price: $38.84
    Previous Close: $374.84

    NORFOLK SOUTHERN Corp
    Sales: 2,250.00%
    Assets / Liabilities: 66.70%
    Assets / Debt: 8.65%
    Earnings Stability: 100.00%
    Dividend Record: 100.00%
    Earnings Growth: 138.11%
    Graham Number / Price: 67.50%

    RALPH LAUREN CORPORATION
    Sales: 1,490.00%
    Assets / Liabilities: 171.60%
    Assets / Debt: 786.33%
    Earnings Stability: 100.00%
    Dividend Record: 55.00%
    Earnings Growth: 202.37%
    Graham Number / Price: 49.56%
    NCAV Price: $14.35
    Previous Close: $155.31

    TERADATA CORPORATION
    Sales: 538.00%
    Assets / Liabilities: 100.71%
    Assets / Debt: 317.34%
    Earnings Stability: 100.00%
    Dividend Record: 0.00%
    Earnings Growth: 173.94%
    Graham Number / Price: 31.40%
    NCAV Price: $2.03
    Previous Close: $43.23

    V.F. CORPORATION
    Sales: 2,284.00%
    Assets / Liabilities: 123.82%
    Assets / Debt: 162.25%
    Earnings Stability: 100.00%
    Dividend Record: 100.00%
    Earnings Growth: 168.89%
    Graham Number / Price: 18.50%
    Jun 10 04:22 PM | Likes Like |Link to Comment
  • Analysts Continue To Use Wrong Benjamin Graham Formula [View article]
    Thank you, Panphobia!

    As mentioned, the footnote was misplaced in newer editions and that probably led to the confusion.
    The warning is present in both old and new editions, but on the next page.

    However, a Graham valuation method with no mention of assets and based on a predictive "expected growth rate" should set off alarm bells for any student of Graham.
    Jun 10 03:41 PM | Likes Like |Link to Comment
  • Analysts Continue To Use Wrong Benjamin Graham Formula [View article]
    Hello Jae Jun,

    As mentioned, Graham gives a footnote as well as a warning that such growth projections are unreliable. Even a stock with absolutely no tangible assets can clear this formula just by having a high "expected" growth rate.

    On the other hand, two entire chapters of The Intelligent Investor are dedicated to methods that Graham actually recommends for investors:

    1. Chapter 14: Stock Selection for the Defensive Investor, and
    2. Chapter 15: Stock Selection for the Enterprising Investor

    The sixteen criteria mentioned in those chapters are designed to verify all aspects of a stock before investment. http://seekingalpha.co... lists all sixteen criteria, and gives step-by-step instructions on how to find stocks that meet them.

    Thank you for your comment.
    May 26 01:02 AM | Likes Like |Link to Comment
  • Analysts Continue To Use Wrong Benjamin Graham Formula [View article]
    Thank you for that very informative comment, ArtfulDodger!

    NCAV stocks are Graham's most popular investment model, and possibly the reason for the common belief that he only recommended cheap stocks. But Graham actually recommended Defensive and Enterprising stocks before NCAV stocks and both were allowed higher quantitative evaluations and required greater qualitative checks. Graham did advocate paying more for quality. His only prerequisite was that there be the margin of safety between price and value, whether the value be qualitative or quantitative.

    In fact, the last of the Graham strategies mentioned in http://seekingalpha.co... is "Special Situations", which is precisely the type of investment you speak of. But he did not recommend it for the ordinary investor as it supposedly required a high degree of skill, experience and resources. As Buffett said, Graham was more focussed on developing an investment model with which the ordinary investor - with his ordinary resources - could use to get results similar to his own.

    But Buffett being Buffett has the skill, experience and resources; and yes, almost all his investments do fall in Graham's "Special Situations" category.

    Thank you again for a very informative comment!
    May 23 09:52 PM | Likes Like |Link to Comment
  • Joel Greenblatt Is A Modern-Day Benjamin Graham [View article]
    Thank you, Nat Hunt.
    May 23 05:18 AM | Likes Like |Link to Comment
  • Analysts Continue To Use Wrong Benjamin Graham Formula [View article]
    Hello Jim Allen,

    As mentioned, Graham gives a footnote as well as a warning that such growth projections are unreliable. Even a stock with absolutely no tangible assets can clear this formula just by having a high "expected" growth rate.

    On the other hand, two entire chapters of The Intelligent Investor are dedicated to methods that Graham actually recommends for investors:

    1. Chapter 14: Stock Selection for the Defensive Investor, and
    2. Chapter 15: Stock Selection for the Enterprising Investor

    The sixteen criteria mentioned in those chapters are designed to verify all aspects of a stock before investment. http://seekingalpha.co... lists all sixteen criteria, and gives step-by-step instructions on how to find stocks that meet them.

    Thank you for your comment.
    May 23 04:17 AM | Likes Like |Link to Comment
  • Joel Greenblatt Is A Modern-Day Benjamin Graham [View article]
    Thanks for the interesting article!
    For the most part, Greenblatt's principles mentioned here seem almost exactly the same as Graham's.

    Just a quick note though: it's unlikely that Benjamin Graham would have claimed to have a formulaic way to beat the market. The below excerpt is from Graham's seminal book, The Intelligent Investor.

    "All of these judgments could be defended even today by adroit arguments. But it is doubtful if they have been as useful as our more pedestrian counsels—in favor of a consistent and controlled common-stock policy on the one hand, and discouraging endeavors to “beat the market” or to “pick the winners” on the other."
    - Benjamin Graham, The Intelligent Investor

    The Intelligent Investor has numerous such instances where Graham discourages readers from attempting to beat the market. Buffett himself said "Beware of geeks bearing formulas" in his 2008 Annual letter to shareholders.

    Benjamin Graham actually recommended three different grades of stocks for investment - Defensive, Enterprising and NCAV - and sixteen criteria for recognizing them.

    http://seekingalpha.co... lists all sixteen of the criteria Graham recommended in The Intelligent Investor, and gives step-by-step instructions on how to find stocks that meet them.
    May 20 04:40 PM | Likes Like |Link to Comment
  • Analysts Continue To Use Wrong Benjamin Graham Formula [View article]
    That's a very nice analogy, Jim Allen!

    When done for the purpose of investment, buying real estate is really no different from buying stocks. The old misconception that real estate prices only go up will find fewer takers after the crash of 2008. In fact, stocks have quite a few advantages over real estate - better liquidity, more historical performance data, better overall performance, and more formally documented approaches to analysis.

    You're right in that the general idea is to ensure you're not paying too much (keeping a "Margin of Safety") and there are multiple ways to calculate the value of a stock.

    The purpose of the article was only to point out that - if you're following Graham's approaches to investing - Graham had very specifically warned against using this formula, or any other such growth stock valuation.

    The other major arguments against this formula - other than the fact that Graham warned against it - are that

    1. It uses subjective future estimates rather than objective past figures
    2. It makes no allowance for a Margin of Safety in terms of Assets; only Earnings.
    May 20 04:25 AM | Likes Like |Link to Comment
  • How To Invest In A Deep Value Investment Opportunity In 3 Easy Steps: Load Caza Oil & Gas, Sit, And Wait [View article]
    Thank you for the detailed analysis!

    Benjamin Graham was the founder of Value Investing, as mentioned in the article, as well as Warren Buffett's mentor (Buffett's son is named after Graham).

    So while there are multiple ways to calculate the value of a stock, it is important to note that this article does not use the methods suggested by the said founder of Value Investing, and CAZFF does not meet any of the Graham's investment criteria.

    Benjamin Graham recommended three different grades of stocks for investment - Defensive, Enterprising and NCAV - and sixteen criteria for finding them.

    For Defensive investment, Benjamin Graham required that the stock first have uninterrupted earnings for the previous 10 years, uninterrupted dividends for the previous 20 years, and meet 4 other criteria.

    Given below are the Defensive ratings for CAZFF:

    Sales: 1.66%
    Assets / Liabilities: 72.35%
    Assets / Debt: 21.19%
    Earnings Stability: 0.00%
    Dividend Record: 0.00%
    Earnings Growth: 0.00%
    Graham Number / Price: 0.00%

    Defensive stocks require all the above to be above 100%.
    CAZFF does not meet the criteria for Enterprising or NCAV investment either.
    Details and data used: http://bit.ly/1qPZ6Gm

    This does not mean that the article is wrong. The stock could still be a great buy and perform as expected. The analysis just does not apply Value Investing as taught by its founder.

    It should also be noted that some stocks that pass the Graham criteria may do badly and some that don't pass them may do very well. But the most successful investors are usually those who ride out stock markets safely for decades, and they almost always tend to be those who follow Graham (a peculiar phenomenon that is elaborated more on in Buffett's 1984 article "The Superinvestors of Graham-and-Doddsville" which can be found online).
    May 19 04:05 PM | Likes Like |Link to Comment
COMMENTS STATS
372 Comments
156 Likes