Buffett, who credits Graham with grounding him with a sound intellectual investment framework, describes Graham as the second most influential person in his life after his own father. In fact, Graham had such an overwhelming influence on his students that two of them, Buffett and Kahn, named their sons after him.
In the preface to Graham's book, The Intelligent Investor, Buffett calls it "by far the best book about investing ever written."
Graham's Enterprising Grade Criteria:
Previously, in How To Build A Complete Benjamin Graham Portfolio, we have seen how to build portfolios of various grades of stocks recommended by Graham. Then earlier this week, we saw 10 Stocks Meeting Benjamin Graham's Defensive Criteria In 2013.
Graham recommended Enterprising grade stocks for investors who wanted better returns than Defensive investors, and were willing to put in more effort than Defensive investors into the creation and maintenance of their portfolios. The criteria that Graham specified for identifying Enterprising stocks are as follows:
Enterprising Graham Stocks for 2013:
Summarized from Chapter 15 of The Intelligent Investor - Stock Selection for the Enterprising Investor:
[Note: For issues selling at P/E multipliers under 10]
1-A. Current assets at least 1 1⁄2 times current liabilities.
1-B. Debt not more than 110% of net current assets.
2. Earnings stability: No deficit in the last five years covered in the Stock Guide.
3. Dividend record: Some current dividend.
4. Earnings growth: Last year's earnings more than those of 1966.
[Note: This corresponds approximately to the earnings of 2008 today]
5. Price: Less than 120% net tangible assets.
Applying Graham's 16-step analysis to 4700 NYSE and NASDAQ stocks gives the following list of companies that meet all of Graham's Enterprising criteria today.
|Company||Ticker Symbol||Current Assets||Current Liabilities||Long Term Debt||Current EPS||Book Value (Tangibles only)||Enterprising Price||Current Price|
|Jinpan International Ltd||JST||$209.22 Million||$94.92 Million||$1.55 Million||$1.45||$9.29||$11.15||$5.06|
|Communications Systems Inc||JCS||$89.95 Million||$15.39 Million||$1.57 Million||$1.15||$10.81||$11.50||$10.17|
|Neutral Tandem Inc||IQNT||$147.15 Million||$33.63 Million||$0.00 Million||$0.82||$6.43||$7.72||$3.44|
|China Digital TV Holding Co Ltd||STV||$310.00 Million||$108.81 Million||$0.00 Million||$0.69||$3.48||$4.18||$1.73|
|Validus Holdings Ltd||VR||$10,020.00 Million||$6,000.00 Million||$787.80 Million||$3.99||$36.04||$39.90||$37.39|
The Enterprising Price is calculated as the lower of 10 times last year's Earnings or 120% net tangible assets. All six stocks above also have no earnings deficit in the last five years, have paid dividends last year and meet all of Graham's other Asset, Liability and Growth criteria for Enterprising investment.
In addition, JCS also has an uninterrupted dividend record of 20 years, which actually makes it pass the dividend criteria for defensive investment. In fact, it passes all the criteria for defensive investment other than Sales and Liabilities. JST has an uninterrupted dividend record of 10 years.
Most stocks in this list exceed the required earnings deficit criteria, with JCS and JST having no earnings deficit in the last 10 years.
The latest list of approved Graham stocks changes everyday in accordance with price changes and financial releases. The Comprehensive Graham Screener can be used to find more of the latest Defensive, Enterprising and NCAV Graham stocks from 4700 NYSE and NASDAQ stocks. By default, the screener lists all stocks that are approved by the Graham criteria. The drop-down menus on the screener can be used to specify grades of approved Graham stocks like the Enterprising ones given here.
Disclaimer: The results were arrived at by automated quantitative analysis and were not verified manually. Verify the validity of the data used -- most importantly, for any recent stock splits -- before making an investment decision.