Benjamin Graham suggested looking for stocks with a Graham blended multiplier below the value of 22.5, because in such a case the stock will most likely be undervalued by the market.
The Graham blended multiplier is calculated by multiplying the price-earnings ratio by the price-book ratio.
Benjamin Graham is considered to be the pioneer of value investing. The American investor, economist and professor is the co-author (along with David Dodd) of the book "Security Analysis" (1934) and the sole author of "The Intelligent Investor" (1949).
Wall Street sell-side analysts have also issued positive recommendation ratings for the following companies.
Royal Dutch Shell
The first company to have a look at is Royal Dutch Shell plc (RDS.B).Shares of the British-Dutch petrochemical company closed at $59.03 on Tuesday for a market capitalization of $233.32 billion.
The stock has a Graham blended multiplier of 13.3, as the price-earnings ratio is 11.37 and the price-book ratio is 1.17. The oil and gas industry has a median of 10.91 for the price-earnings ratio and of 0.95 for the price-book ratio.
Over the past year through Dec. 17, the share price has risen by 1% to above the 100- and 50-day simple moving average lines. It is still below the 200-day SMA line.
The 52-week share price range is $54.64 to $67.45.
The dividend yield is 6.37% versus the industry median of 4.27% as of Dec. 17. The company is currently paying a cash quarterly dividend of 94 cents per common share. The next payment will be sent out to shareholders on Dec. 18. Royal Dutch Shell has been paying dividends since Dec. 15, 2005.
Wall Street issued an overweight recommendation rating and has set an average target price of $71.15.
WestRock
The second company to consider is WestRock Company (WRK, Financial). Shares of the U.S. manufacturer of paper and packaging solutions closed at $42.01 on Tuesday for a market capitalization of $10.85 billion.
The stock has a Graham blended multiplier of 11.62, as the price-earnings ratio is 12.54 and the price-book ratio is 0.93. The packing and containers industry has a median of 15.11 for the price-earnings ratio and of 1.03 for the price-book ratio.
Over the past year through Dec. 17, the share price has risen 7% to above the 200-, 100- and 50-day simple moving average lines.
The 52-week range is $31.94 to $43.01.
The dividend yield is 4.36% versus the industry median of 2.56% as of Dec. 17. Currently, the company is paying a quarterly cash dividend of 46.5 cents per common share. WestRock has been paying dividends for over 25 years.
Wall Street issued an overweight recommendation rating and has set an average target price of $45.57.
Unum Group
The third company under consideration is Unum Group (UNM, Financial).
Shares of the Chattanooga, Tennessee-based provider of financial protection benefit solutions (aka insurance) closed at $30.51 on Tuesday for a market capitalization of $6.3 billion.
The stock has a Graham blended multiplier of 4, as the price-earnings ratio is 6.16 and the price-book ratio is 0.65. The insurance industry has a median of 13.71 for the price-earnings ratio and a median of 1.16 for the price-book ratio.
Over the past year through Dec. 17, the share price has risen 6% to above 100- and 50-day simple moving average lines. It is still below the 200-day SMA line.
The 52-week range is $24.71 to $38.29.
The dividend yield is 3.57% versus the industry median of 3.48% as of Dec. 17. The company is currently paying a quarterly cash dividend of 28.5 cents per common share. Unum has been paying dividends for more than 33 years.
Wall Street issued a hold recommendation rating for shares of Unum Group and has set an average target price of $34.
Disclosure: I have no positions in any securities mentioned.
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