fxtrader07

35 Stocks That Ben Graham Would Like Here

hi ryan, perhaps it will make sense to amend grahams criterias by adding a new one that takes into consideration the new environment in corporate finance that did not exist back then. it is stunning to see how many real or perceived "value investors" got creamed by buying into seemingly cheaply valued financial stocks only to discover that either the assets were worth much less, the liabilities way greater or the leverage so high and only short-term financed that the whole valuation assumed earlier proved inaccurate.
so far i have no idea how to construct such a criterion. one might exclude banks and investment banks alltogether, of course but then one must also consider excluding some insurance companies that hold billions of yet-to-implode cdo exposure and then where does one stop? in any case it becopmes obvious that running a "graham" screen just provides a starting point that has to be followed by a closer examination of the numbers. for numbers don't lie but they might tell different stories depending how one looks at them

35 Stocks That Ben Graham Would Like Here

good starting point for screening the stock universe. however, shortening the earnings history to 5 years from 10 is a very very serious flaw. you would think graham had chosen this period deliberately, not? of course he did. by looking at 5-year histories you run the very real risk of only capturing one phase of an economic cycle and this holds particularly true for the past 5 years where we have experienced an arttificially prolonged economic boom that led precisely to the current mess which is just beginning to unfold. i suggest you take 10 years not 5, it will help to avoid some sunshine-weather-only companies