This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

What Would Ben Graham Buy?

NEW YORK (TheStreet) -- One of my early Street.com columns focused on identifying companies that the father of value investing and one of my investment heroes, Ben Graham, might be looking at if he were still alive and managing money.

The criteria for this search were based Graham's technique of identifying stocks for the "Defensive Investor," which he described in the his must-read book, "Intelligent Investor."

While I have modified Graham's criteria slightly, the principles and objectives are still the same:

1. Adequate Size: Graham excluded smaller companies; I've set the minimum market cap at $1 billion.

2. Strong Financial Condition: Minimum current ratio of 2; long-term debt must be less than working capital.

3. Earnings Stability: Graham required positive earnings for at least 10 consecutive years: I am using seven years.


4. Dividends: Graham required "uninterrupted" dividends for at least 20 years; I am using seven years here as well.

5. Earnings Growth: Graham sought a minimum increase of 33% in earnings per share in the past 10 years; I am using a minimum compounded annual growth rate in earnings of 5% over seven years.

6. Moderate Price Earnings Ratio: Average PE ratios should be less than 15 over the past three years

7. Moderate Ratio of Price to Assets: Graham sought companies with price to book ratios below 1.5 but would accept a higher PE ratio, if price to book was lower. This end result was that PE times Price to Book ratio should be less than 22.5.

8. Other: U.S. companies only; I excluded foreign companies and American Depository Receipts from the results.

The last time I ran this search in February there were just two names, Intel (INTC) andCash America (CSH). Now there are five. While Intel does not make the cut this time, Cash America is a holdover.


The oil and gas industries are well represented with petroleum refiner HollyFrontier (HFC) and contract driller Helmerich & Payne (HP). The latter is a name that I've seen on several different value-related screens in recent years, and it currently trades for 10.5 times trailing earnings. Back in December, the company recently increased its quarterly dividend more than 100% from 7 cents to 15 cents. There is also CF Industries (CF).

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,943.81 +28.74 0.17%
S&P 500 1,967.57 +2.89 0.15%
NASDAQ 4,415.49 +19.2860 0.44%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs