Having penned The Intelligent Investor and Security Analysis, and mentored Warren Buffett, Benjamin Graham has cemented his place in investing history.
A couple of years after the '73-'74 bear market (strikingly similar to our current market conditions), the Dean of Wall Street offered this advice in an interview published in the Financial Analysts Journal: "The individual investor should act consistently as an investor and not as a speculator. This means, in sum, that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning."
At another point, he said: "[My advice] consists of buying groups of stocks at less than 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."
Following that advice, I used our new CAPS screening tool to invest in stocks Graham might find interesting. Each has:
- a price-to-earnings ratio no higher than 7
- long term debt-to-equity ratio less than 1
- at least four stars in Motley Fool CAPS
Remember, in the first year for which we have data, four-star companies outperformed with an average gain of more than 19%. Five-star stocks did even better.
|
Company |
Price |
P/E (TTM) |
Debt-to-Equity |
|---|---|---|---|
|
Cemex |
$22.60 |
6.7 |
0.49 |
|
H&E Equipment Services |
$11.60 |
6.9 |
0.90 |
|
Platinum Underwriters |
$33.71 |
5.4 |
0.13 |
|
RenaissanceRe |
$47.64 |
6.3 |
0.16 |
|
Stone Energy |
$57.56 |
7.0 |
0.42 |
|
WellCare Healthplans |
$31.56 |
5.8 |
0.23 |
Data from Motley Fool CAPS as of July 20. TTM = trailing 12 months.
Do you think Graham would like these? Do you have some ideas of your own about whether they're are worth looking into? Come and join us on Motley Fool CAPS to share your opinion with the 110,000 (and growing) members.
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