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Strategies & Market Trends : Value Investing
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To: E_K_S who wrote (48490)6/29/2012 2:13:44 AM
From: Paul Senior1 Recommendation  Read Replies (1) of 78744
 
"A company would have to meet seven of the following ten criteria (as laid out in Security Analysis) before Graham would consider it a cheap stock:)"

This may be valid today. In his last years though, Dr. Graham, as regards building a portfolio, did not advocate "elaborate techniques of security analysis in order to find superior value opportunities".

In answering the question, "Can you indicate concretely how an individual investor should create and maintain his common stock portfolio?", Dr. Graham gave two examples of his suggested approach: The first was selecting stocks "at less than their working-capital value, or net current asset value". This technique he said, "appears severely limited in its application".

The other approach "consists of buying groups of stocks at less then their current or intrinsic value as indicated by one or more simple criteria. The criterion I prefer is seven times the reported earnings for the past 12 months. You can use others - such as a current dividend return above seven per cent or book value more than 120 per cent of price, etc... I have every confidence in the...merit of this general method based on (a) sound logic, (b) simplicity of application and (c) an excellent supporting record. At bottom it is a technique by which true investors can exploit the recurrent excessive optimism and excessive apprehension of the speculative public".

From my treasured Sept/Oct 1976 issue of Financial Analysts Journal, "A conversation with Benjamin Graham"
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