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  • ModernGraham Quarterly Valuation Of Automatic Data Processing [View article]
    Hello DeJagen,

    ADP does not clear any one set of Graham's investment criteria completely; i.e., it's overvalued.

    The Final Graham Assessment for Automatic Data Processing (ADP) is given below.
    Defensive Price (Graham Number): $29.31
    Enterprising Price (Serenity Number): $13.64
    NCAV Price: $0.25
    Qualitative Result: Bargain / NCAV
    Intrinsic Value: $0.25
    Previous Close: $84.71
    Quantitative Result: 0.30%

    The Intrinsic Value for a Defensive quality stock equals its Defensive Price (Graham Number), the Intrinsic Value of an Enterprising quality stock equals its Enterprising Price and the Intrinsic Value for an NCAV quality stock equals its NCAV Price.

    According to Graham, a stock is undervalued below its Intrinsic Value and overvalued above its Intrinsic Value.

    But please note that this does not imply that all stocks not clearing Graham's rules are bad investments. Graham's rules are just extremely selective. It's more a question of how to get the "best" long-term results.

    Thank you.
    Dec 22, 2014. 04:09 PM | 1 Like Like |Link to Comment
  • ModernGraham Quarterly Valuation Of Automatic Data Processing [View article]
    The ModernGraham website lists the following formula as one of the evaluation methods it uses:

    Intrinsic Value = EPS x (8.5 + 2xGrowth)

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

    Article 1: http://seekingalpha.co... discusses the issue in detail.

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

    Another example, again 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 other things being equal - rate overvalued stocks higher than undervalued ones. Other rules mentioned here too - such as dividend record, and PE & PB ratios - are all very different from what Graham actually recommended.

    Graham spent nearly 50 years developing, backtesting and refining an investment framework that has withstood the test of time, and has been endorsed by some of the world's most successful investors. Modifying Graham's rules so heavily seems very ill-advised.

    Given below are the actual Graham ratings for Automatic Data Processing (ADP), with no adjustments other than those for inflation.

    Defensive Graham investment requires all the ratings to be at least 100%.
    Enterprising Graham investment requires the ratings to be at least - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Automatic Data Processing - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 2,262.00%
    Current Assets ÷ [2 x Current Liabilities]: 52.97%
    Net Current Assets ÷ Long Term Debt: 9,987.76%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 123.37%
    Graham Number ÷ Previous Close: 34.60%

    Article 2: http://seekingalpha.co... shows how one can assess 5000+ NYSE and NASDAQ stocks by a similar exact Benjamin Graham assessment, with no adjustments other than those for inflation.
    Dec 21, 2014. 01:01 PM | 1 Like Like |Link to Comment
  • Investing For Beginners With Benjamin Graham [View article]
    Hello MacKay Dave,

    Thank you for asking!

    You will probably notice such a trend in a lot of stocks that clear Graham's criteria.

    Graham's principles directly contradict most of the common practices in Technical Analysis. The fact that the stock has been on a downtrend is probably a good indication that you're applying Graham correctly.

    Given below is a relevant excerpt from the Introduction to The Intelligent Investor:

    "Since our book is not addressed to speculators, it is not meant for those who trade in the market. Most of these people are guided by charts or other largely mechanical means of determining the right moments to buy and sell. The one principle that applies to nearly all these so-called “technical approaches” is that one should buy because a stock or the market has gone up and one should sell because it has declined. This is the exact opposite of sound business sense everywhere else, and it is most unlikely that it can lead to lasting success on Wall Street. In our own stock-market experience and observation, extending over 50 years, we have not known a single person who has consistently or lastingly made money by thus “following the market.” We do not hesitate to declare that this approach is as fallacious as it is popular. "

    Graham's recommendation is, essentially, to ignore such trends.
    Nov 27, 2014. 08:00 AM | 1 Like Like |Link to Comment
  • Fluor: Industrial Construction Company Getting Rave Reviews [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.

    Graham emphasized that the secret of sound investment was the "Margin of Safety". He recommended various categories of stocks - Defensive, Enterprising and NCAV - and specified precise qualitative and quantitative rules for each category.

    For example, given below are the actual Graham ratings for Fluor Corporation (FLR).

    Defensive Graham investment requires all the ratings to be at least 100%.
    Enterprising Graham investment requires the ratings to be at least - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Fluor Corporation - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 5,470.00%
    Current Assets ÷ [2 x Current Liabilities]: 88.10%
    Net Current Assets ÷ Long Term Debt: 522.86%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 65.00%
    Earnings Growth (100% ⇒ 30% Growth): 197.61%
    Graham Number ÷ Previous Close: 60.42%

    Fluor Corporation ranks well by Graham's qualitative rules, but exceeds Graham's quantitative limits.

    Warren Buffett once wrote an article describing how Benjamin Graham's long record of tutoring exceptional investors (such as Buffett himself) is irrefutable. The article is called "The Superinvestors of Graham-and-Doddsville".

    http://seekingalpha.co... shows how anyone can screen 5000+ NYSE and NASDAQ stocks today, by an exact 17-point Benjamin Graham assessment.
    Nov 24, 2014. 03:26 PM | 1 Like Like |Link to Comment
  • Dividend Aristocrats In Focus Part 41: Abbott Laboratories [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.

    Graham emphasized that the secret of sound investment was the "Margin of Safety". He recommended various categories of stocks - Defensive, Enterprising and NCAV - and specified precise qualitative and quantitative rules for each category.

    For example, given below are the actual Graham ratings for Abbott Laboratories (ABT).

    Defensive Graham investment requires all the ratings to be at least 100%.
    Enterprising Graham investment requires the ratings to be at least - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Abbott Laboratories - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 4,370.00%
    Current Assets ÷ [2 x Current Liabilities]: 101.23%
    Net Current Assets ÷ Long Term Debt: 287.49%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 120.46%
    Graham Number ÷ Previous Close: 71.06%

    Abbott Laboratories ranks very highly by Graham's qualitative rules, but exceeds Graham's quantitative limits.

    Warren Buffett once wrote an article describing how Benjamin Graham's long record of tutoring exceptional investors (such as Buffett himself) is irrefutable. The article is called "The Superinvestors of Graham-and-Doddsville".

    http://seekingalpha.co... shows how one can screen 5000+ NYSE and NASDAQ stocks today by an exact 17-point Benjamin Graham assessment.
    Nov 24, 2014. 03:16 PM | 1 Like Like |Link to Comment
  • ModernGraham Annual Valuation Of American Electric Power Company Inc. [View article]
    The ModernGraham website lists the following formula as one of the evaluation methods it uses:
    Intrinsic Value = EPS x (8.5 + 2xGrowth)

    Benjamin Graham actually gave the following warnings about this formula:
    1. "Warning: This material is supplied for illustrative purposes only".
    2. "Let the reader not be misled into thinking that such projections have any high degree of reliability".
    3. "Note that we do not suggest that this formula gives the “true value” of a growth stock".

    Graham only used this formula to demonstrate why oversimplified growth estimates are unreliable. But due to a printing omission in recent editions of The Intelligent Investor, this formula is often used today instead of Graham's actual (and more thorough) methods.

    Article 1: http://seekingalpha.co... discusses the issue in detail.

    Warren Buffett once wrote an article describing how Benjamin Graham's principles are everlasting, and his students consistently exceptional. The article is called "The Superinvestors of Graham-and-Doddsville".

    But most of what Graham actually taught has been forgotten today, and things he warned against are often attributed to him instead. The above formula is just one example. Even when Graham's recommended methods are used, they are heavily modified - often beyond recognition - to clear the stocks, rather than having stocks clear them.

    For example:
    "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 will - all other things being equal - rate overvalued stocks higher than undervalued ones.

    Even the other rules mentioned here - such as dividend record, and PE & PB ratios - are all very different from what Graham actually recommended.

    Given below are the actual Graham ratings for American Electric Power (AEP).

    Defensive Graham investment requires all the ratings to be at least 100%.
    Enterprising Graham investment requires the ratings to be at least - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    American Electric Power - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 3,072.00%
    Current Assets ÷ [2 x Current Liabilities]: 35.26%
    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): 96.97%
    Graham Number ÷ Previous Close: 88.02%

    Graham emphasized that the secret of sound investment was the "Margin of Safety". He recommended various categories of stocks - Defensive, Enterprising and NCAV - and specified precise qualitative and quantitative rules for each category.

    Article 2: http://seekingalpha.co... shows how anyone can do a true 17-point Benjamin Graham assessment for 5000+ NYSE and NASDAQ stocks; with no adjustments other than those for inflation.
    Nov 21, 2014. 03:30 PM | 1 Like Like |Link to Comment
  • Universal Corporation Is Set To Outperform [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.

    Graham emphasized that the secret of sound investment was the "Margin of Safety". He recommended various categories of stocks - Index, Defensive, Enterprising and NCAV - and specified precise qualitative and quantitative rules for each category.

    For example, given below are all Graham ratings for Universal Corporation (UVV).

    Defensive Graham investment requires all the ratings to be at least 100%.
    Enterprising Graham investment requires the ratings to be at least - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Universal Corporation - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 508.00%
    Current Assets ÷ [2 x Current Liabilities]: 183.87%
    Net Current Assets ÷ Long Term Debt: 507.58%
    Earnings Stability (100% ⇒ 10 Years): 100.00%
    Dividend Record (100% ⇒ 20 Years): 100.00%
    Earnings Growth (100% ⇒ 30% Growth): 142.00%
    Graham Number ÷ Previous Close: 175.23%

    Warren Buffett once wrote an article describing how Graham's principles are everlasting, and his students consistently exceptional. The article is called "The Superinvestors of Graham-and-Doddsville".

    http://seekingalpha.co... shows how anyone can do a true 17-point Benjamin Graham assessment for 5000+ NYSE and NASDAQ stocks; with no adjustments other than those for inflation.

    In short, of 5000+ stocks analyzed using Graham's 17 rules today, Universal Corporation is one of the highest rated. Possibly, "the" highest.

    Thank you.
    Nov 21, 2014. 01:09 PM | 1 Like Like |Link to Comment
  • Is Exxon Mobil Stock A Buy Right Now? [View article]
    Thank you for the disclosure, charliezap.
    That's quite a story!

    Warren Buffett wrote "The Superinvestors of Graham-and-Doddsville" describing how Graham's principles are everlasting, in 1984 (30 years ago).

    Also, 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."

    NCAV stocks are the most well-known of Graham's strategies, and the source of the general misconception that Graham only recommended cheap stocks.

    But Graham actually recommended Index, Defensive and Enterprising stocks before NCAV stocks; and all of them were allowed higher Quantitative valuations and required greater Qualitative checks than NCAV stocks.

    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.

    Also, the earlier comment that was not meant to imply that all stocks not clearing Graham's rules are bad! There are many schools of thought one can follow to invest successfully.

    Graham's rules are just extremely selective, that's all. Even for a stock that doesn't clear them, the Graham ratings gives a point of reference as to how the stock compares against others.

    Thank you.
    Nov 21, 2014. 11:01 AM | 1 Like Like |Link to Comment
  • Dividend Aristocrats In Focus Part 39: AT&T [View article]
    "Not at the moment, because Graham says so."
    Just eight words.

    All analyses on Serenity follow Graham faithfully, BuffaloWingswithRanchD...

    Nothing more, nothing less.

    Thank you.
    Nov 21, 2014. 07:50 AM | 1 Like Like |Link to Comment
  • Dividend Aristocrats In Focus Part 39: AT&T [View article]
    Hello BuffaloWingswithRanchD...

    Graham prescribed very different strategies for institutional, highly experienced and well-connected investors.

    In the "Legacy of Benjamin Graham" video released by the Heilbrunn Center, Buffett explains how Graham was focused on refining methods that ordinary investors - without specialized access - could apply to achieve results similar to his own (Grahams's).

    Also, 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."

    For more details, please see the section on "Special Situations" in http://seekingalpha.co...

    Thank you.
    Nov 21, 2014. 07:17 AM | 1 Like Like |Link to Comment
  • Is Exxon Mobil Stock A Buy Right Now? [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.

    Buffett even named his son after Graham, and describes Graham's book - The Intelligent Investor - as "by far the best book about investing ever written".

    Graham recommended various categories of stocks - Index, Defensive, Enterprising and NCAV. He emphasized that the secret of sound investment was the "Margin of Safety", and specified precise qualitative and quantitative rules for each category.

    For example, given below are all Graham ratings for Exxon Mobil Corporation (XOM).

    Defensive Graham investment requires all the ratings to be at least 100%.
    Enterprising Graham investment requires the ratings to be at least - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Exxon Mobil Corporation - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 87,652.00%
    Current Assets ÷ [2 x Current Liabilities]: 41.34%
    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): 120.74%
    Graham Number ÷ Previous Close: 92.63%

    Warren Buffett once wrote an article explaining how Graham's principles are everlasting, their results irrefutable, and his students consistently exceptional. It's called "The Superinvestors of Graham-and-Doddsville".

    http://seekingalpha.co... shows how anyone can do a true 17-point Benjamin Graham assessment for 5000+ NYSE and NASDAQ stocks; with no adjustments other than those for inflation.
    Nov 20, 2014. 12:54 PM | 1 Like Like |Link to Comment
  • ModernGraham Quarterly Valuation Of Visa Inc. [View article]
    The ModernGraham website lists the following formula as one of the evaluation methods it uses:
    Intrinsic Value = EPS x (8.5 + 2xGrowth)

    Benjamin Graham actually gave the following warnings about this formula:
    1. "Warning: This material is supplied for illustrative purposes only".
    2. "Let the reader not be misled into thinking that such projections have any high degree of reliability".
    3. "Note that we do not suggest that this formula gives the “true value” of a growth stock".

    Graham only used this formula to demonstrate why oversimplified growth estimates are unreliable. But due to a printing omission in recent editions of The Intelligent Investor, this formula is often used today instead of Graham's actual (and more thorough) methods.

    Article 1: http://seekingalpha.co... discusses the issue in detail.

    Warren Buffett once wrote an article describing how Benjamin Graham's principles are everlasting, their results irrefutable, and his students consistently exceptional. It's called "The Superinvestors of Graham-and-Doddsville".

    But most of what Graham actually taught has been forgotten today, and things he warned against are often attributed to him instead. The above formula is just one example. Even when Graham's recommended methods are used, they are heavily modified - often beyond recognition - to clear the stocks, rather than having stocks clear them.

    Given below are the actual Graham ratings for Visa Inc (V).

    Defensive Graham investment requires all the ratings to be at least 100%.
    Enterprising Graham investment requires the ratings to be at least - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Visa Inc - Defensive Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 2,356.00%
    Current Assets ÷ [2 x Current Liabilities]: 90.22%
    Net Current Assets ÷ Long Term Debt: 100.00%
    Earnings Stability (100% ⇒ 10 Years): 60.00%
    Dividend Record (100% ⇒ 20 Years): 30.00%
    Earnings Growth (100% ⇒ 30% Growth): 0.00%
    Graham Number ÷ Previous Close: 29.58%

    Graham recommended various categories of stocks - Index, Defensive, Enterprising and NCAV. He emphasized that the secret of sound investment was the "Margin of Safety", and specified precise qualitative and quantitative rules for each category.

    Article 2: http://seekingalpha.co... shows how anyone can do a true 17-point Benjamin Graham assessment for 5000+ NYSE and NASDAQ stocks; with no adjustments other than those for inflation.
    Nov 19, 2014. 03:27 PM | 1 Like Like |Link to Comment
  • Update: Health Insurance Innovations' Growth Is Accelerating [View article]
    That makes sense, Mike Arnold.

    The earlier comment was not meant to imply that only Graham's methods are successful. Sincere apologies if it seemed so. There are many ways to invest successfully, of course.

    In fact, Buffett wrote in that article that even Graham's students rarely bought the same stocks. They all followed the same general principles but applied them in different ways.

    Munger's comments on Graham are well-known, but they run contrary to everything Buffett has ever said about Graham.

    Serenity's analyses are based on what Buffett has said about Graham, and on what Graham taught. After all, Buffett has been a life-long investor, Graham's protégé and the original founder of BRK in its current form.

    Thank you.
    Nov 13, 2014. 01:17 PM | 1 Like Like |Link to Comment
  • Update: Health Insurance Innovations' Growth Is Accelerating [View article]
    Thank you for your replies!

    Growth stocks, globalization and technological progress are the most common objections to Graham's principles. They've been around almost as long as the principles themselves.

    Globalization is actually not a recent phenomenon. In fact, IMF and the World Bank were formed early in the 19th century to regulate globalization.

    As for growth stocks, Graham's principles may not catch stocks like Amazon but then no other strategy can do so consistently either. Making money on such a stock is really no different from winning the lottery. It's purely a matter of luck.

    Graham's students don't look for lotteries. Instead, they follow strategies that are proven to consistently give good results for long periods of time. They may miss the outliers but eventually, they fare better than everyone else (in spite of ignoring "growth stocks").

    In fact, one might even say that to follow Graham is to stop looking for the lotteries, and to start treating investing as a business operation. Lotteries are exciting but ultimately, disappointing. Business is boring but eventually, very profitable.

    As for progress, it's important to understand the difference between principle and application.

    The application of principles may change with time, but the principles themselves remain the same and are the starting point on which one builds on (cars may have become faster, but wheels continue to be round).

    The Amsterdam Stock Exchange is 400+ years old. NYSE is 150+ years old. The proliferation of technology may have made stock markets more competitive in recent years, but the fundamental ways in which they function remain the same.

    Warren Buffett's article "The Superinvestors of Graham-and-Doddsville" gives a detailed explanation of why Graham's principles are timeless, and why his students are the world's most successful investors.

    In fact, Buffett even named his son after Graham, and describes Graham's book - The Intelligent Investor - as by "far the best book about investing ever written".

    Buffett ended his article saying:

    "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."
    Nov 13, 2014. 07:27 AM | 1 Like Like |Link to Comment
  • Update: Health Insurance Innovations' Growth Is Accelerating [View article]
    With reference to the Benjamin Graham quote, given below are the actual Graham ratings for Health Insurance Innovations Inc (HIIQ).

    Defensive Graham investment requires all the ratings to be at least 100%.
    Enterprising Graham investment requires the ratings to be at least - N/A, 75%, 90%, 50%, 5%, N/A and 137%.

    Health Insurance Innovations Inc - Graham Ratings
    Sales | Size (100% ⇒ $500 Million): 11.33%
    Current Assets ÷ [2 x Current Liabilities]: 215.91%
    Net Current Assets ÷ Long Term Debt: 100.00%
    Earnings Stability (100% ⇒ 10 Years): 10.00%
    Dividend Record (100% ⇒ 20 Years): 0.00%
    Earnings Growth (100% ⇒ 30% Growth): 0.00%
    Graham Number ÷ Previous Close: 24.81%

    Warren Buffett once wrote an article explaining how Benjamin Graham's principles are everlasting, their results irrefutable, and his students consistently exceptional. It's called "The Superinvestors of Graham-and-Doddsville".

    But most of what Graham actually taught has been forgotten today, and things he warned against are often attributed to him instead. Even when Graham's recommended methods are used, they are heavily modified - often beyond recognition - to clear the stocks, rather than having the stocks clear them.

    Graham recommended various categories of stocks - Index, Defensive, Enterprising and NCAV. He emphasized that the secret of sound investment was the "Margin of Safety", and specified precise qualitative and quantitative rules for each category.

    http://seekingalpha.co... shows how anyone can do a true 17-point Benjamin Graham assessment for 5000+ NYSE and NASDAQ stocks; with no adjustments other than those for inflation.
    Nov 12, 2014. 03:56 PM | 1 Like Like |Link to Comment
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