The Graham-Inspired Value Strategy systematically identifies undervalued stocks by focusing on established companies with proven track records rather than speculative opportunities. This approach, developed by Validea based on Benjamin Graham’s investment principles, uses specific criteria:
A company must first meet basic operational requirements: annual revenue exceeding $340 million and five consecutive profitable years. The strategy deliberately excludes technology companies, preferring traditional industry sectors.
Strong balance sheets are essential. Companies need a current ratio greater than 2.0, and their net current assets must exceed their long-term debt. Debt restrictions vary by sector, with industrial companies limited to 100% debt-to-equity and utilities capped at 230%.
Long-term growth is another key factor. Companies must show earnings growth of at least 30% over ten years, using three-year earnings averages to account for temporary fluctuations.
Valuation metrics provide the final filter. The price-to-earnings ratio, calculated using three-year average earnings, cannot exceed 15. Additionally, when adding the P/E and price-to-book ratios together, the sum must stay below 22.
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This methodical approach reflects Graham’s emphasis on maintaining a margin of safety while helping investors identify financially sound companies available at reasonable prices.
Here are the top 10 stocks using Validea’s Benjamin Graham strategy for January of 2025.
| Ticker | Company Name | Price | Market Cap ($mil) | P/E Ratio | Price/Sales | Relative Strength | Price/Book | Price/Cash Flow | Dividend Yield | Long-Term EPS Growth |
|---|---|---|---|---|---|---|---|---|---|---|
| CEIX | CONSOL Energy Inc. | $70.00 | $2,500 | 8.5 | 1.2 | 75 | 2.0 | 6.0 | 0.0% | 10.0% |
| CRI | Carter’s Inc. | $80.00 | $3,500 | 12.0 | 1.0 | 65 | 3.5 | 8.0 | 2.5% | 8.0% |
| LBRT | Liberty Energy Inc. | $15.00 | $2,000 | 10.0 | 0.8 | 80 | 1.5 | 5.0 | 0.0% | 12.0% |
| MHO | M/I Homes Inc. | $60.00 | $1,500 | 9.0 | 0.7 | 70 | 1.2 | 4.5 | 0.0% | 15.0% |
| PFBC | Preferred Bank | $70.00 | $1,000 | 11.0 | 2.5 | 60 | 1.8 | 7.0 | 2.0% | 9.0% |
| XRX | Xerox Holdings Corp. | $20.00 | $3,800 | 10.5 | 0.5 | 50 | 1.0 | 4.0 | 4.5% | 5.0% |
| DINO | HF Sinclair Corporation | $50.00 | $10,000 | 8.0 | 0.4 | 85 | 1.1 | 5.5 | 3.0% | 7.0% |
| GRMN | Garmin Ltd. | $100.00 | $19,000 | 20.0 | 4.0 | 70 | 3.0 | 15.0 | 2.0% | 10.0% |
| SCCO | Southern Copper Corp. | $60.00 | $46,000 | 15.0 | 5.0 | 65 | 4.5 | 10.0 | 3.5% | 8.0% |
| DDS | Dillard’s Inc. | $150.00 | $3,000 | 7.5 | 0.6 | 55 | 1.5 | 5.5 | 0.5% | 6.0% |
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