NEW YORK (TheStreet) -- As the markets continue to rise despite clouds on the horizon, value investors are having to work very hard to find enticing stocks.That's okay, we don't mind hard work, but admittedly, it does get a bit frustrating. This is not the first time this has happened, and it won't be the last. Sometimes you have to wait until the markets pull back, not that I relish a market correction just so that I can have a deeper bench of value ideas. So, today I'll turn to the old master, Ben Graham, the father of value investing, and a stock screen based on one of his investment techniques. Markets and available information have changed dramatically since Graham's death in 1976, but the investment principles he espoused still have merit. In selecting stocks for the defensive investor, Graham laid out the following criteria; criteria I've modified slightly since the last edition of The Intelligent Investor was published in 1973.
- Adequate Size: Graham excluded smaller companies; I've set the minimum market cap at $1 billion.
- Strong Financial Condition: Minimum ratio of current assets to current liabilities of two; long-term debt must be less than working capital.
- Earnings Stability: Graham required profits for at least 10 consecutive years: I am using seven years.
- Dividends: Graham required "uninterrupted" dividends for at least 20 years; I am using seven years here, as well.
- 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.
- Moderate Price-to--Earnings Ratio: Average PE ratios should be less than 15 over the past three years.
- 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 25.5.
- U.S. Companies: I excluded foreign companies and American depository receipts.
Two companies from that initial list, tobacco company Universal Corp and pawn shop operator Cash America, still make the cut. The other current qualifiers are mining machinery company Joy Global ( JOY) and oil and gas producer HollyFrontier ( HFC). It's slim pickings at best, and time to dig a little deeper. At the time of publication, the author held no positions in any of the stocks mentioned. Follow @JonMHellerCFA This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.