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Benjamin Graham Defensive Picks Part 2

June 06, 2011 | About:
David Chulak

David Chulak

30 followers
I recently submitted four stocks that met the criteria laid out by Benjamin Graham for defensive investors. I do not believe for a moment that the intent was to find stocks that met the criteria, buy several of them, and then sit tight waiting for the stocks to go up. Do not be duped into thinking that no further homework is required prior to picking a stock from a list such as this.

One response from my previous list, which included Curtiss-Wright (CW), appeared to conclude that the stock might be OK, but that no further research was warranted in his estimation due to the valuation or margin of safety available. That is a very valid argument. Just because a stock corresponds to a predetermined list in every way, it may still not have an adequate margin of safety. The margin of safety may be and probably is different for each investor. Here’s a few more stocks for you to consider:

Ameron International Corp. (AMN)

Sales: $504

Current Ratio: 3.62

LTD: Less than Working Capital

Earnings Stability: 10 years of positive earnings

Dividends: 10 year minimum with a 6.25% yield

Earnings Growth: 5.65% per year (5 years)

P/E: 14.14

P/B: 1.17

P/E x P/B: 16.54


Unifirst Corp. Mass (UNF)

Sales: $1068

Current Ratio: 2.0

LTD: Less than Working Capital

Earnings Stability: 10 years of positive earnings

Dividends: 10 year minimum with a .30% yield

Earnings Growth: 12.92% per year (5 years)

P/E: 13.06

P/B: 1.32

P/E x P/B: 17.24

Cash Pawn America (CSH)

Sales: $1335

Current Ratio: 4.6

LTD: Less than Working Capital

Earnings Stability: 9 years of positive earnings

Dividends: 10 year minimum with a .28% yield

Earnings Growth: 19.92% per year (5 years)

P/E: 12.36

P/B: 1.64

P/E x P/B: 20.27

Universal Corp. (UVV)

Sales: $2458

Current Ratio: 3.1

LTD: Less than Working Capital

Earnings Stability: 10 years of positive earnings

Dividends: 10 year minimum with a 4.91% yield

Earnings Growth: 8.28% per year (5 years)

P/E: 6.92

P/B: 0.92

P/E x P/B: 6.37

Disclosure: Long on CSH

About the author:

David Chulak
David Chulak is a private investor that uses a value approach to investing in the styles of Graham & Dodd and Warren Buffet. Looks for that margin of safety in an effort to preserve capital and attempts to guard against short term market fluctuations by having clear rules laid down in advance for selling an equity. Likes to visit the company's where his investments are in order to understand the business better.

Rating: 4.5/5 (8 votes)

Comments

Adib Motiwala
Adib Motiwala - 3 years ago
David,

Thanks for this series. its a good one.

UNF is an interesting company. Would like it cheaper.

CSH appears quite cheap on FCF. What is the regulatory risk on this?

Also, despite all the cash flow, there is not much dividend growth nor buyback of shares. They are very acquisitive in nature...
davidchulak
Davidchulak premium member - 3 years ago
CSH, I believe is still cheap. The risks you mentioned recently raised their ugly head in Texas and then backed off. Overall, I believe some regulation will eventually be passed, but nothing to alter the landscape in any great way.One of the many things I like about CSH is the management. They address each of the risks head on and talk in Buffett type frankness regarding potential risk. This part of the financial market is booming.

UNF, while I am not long on the company, I do keep watching. Could it be cheaper? The way the market has been in the last week, give it a day or two!!!



_

One more thing about CSH, some of their debt agreements do not allow them to take on added debt, require minimum finanical ratios to be met and somewhat restricts their freedom to increase dividends greatly.

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