Benjamin Graham, widely recognized as value investing’s founding father, established a methodical framework for identifying undervalued stocks that continues to guide investors decades later, most notably his famous student Warren Buffett. Graham’s approach centers on discovering financially stable, established companies trading below their true worth, avoiding speculative ventures with uncertain futures.
Investment Philosophy
Graham advocated for investing in businesses with proven performance histories rather than companies built primarily on future promises. This conservative strategy emphasizes protecting invested capital by seeking a substantial “margin of safety” between market price and intrinsic value.
Validea’s Graham-Inspired Investment Strategy
Validea has engineered a quantitative screening system based on Graham’s investment principles, evaluating companies across four essential dimensions:
Business Fundamentals
- Scale Requirement: Companies must generate over $340 million in annual revenue, ensuring adequate business stability and market presence
- Profit Consistency: Must show positive earnings for five straight years, demonstrating operational reliability
- Sector Preference: Favors traditional industries over technology companies, focusing on businesses with more predictable models and easier-to-value assets
Balance Sheet Strength
- Liquidity Measure: Current ratio must be greater than 2.0, showing robust short-term financial position
- Conservative Debt Position: Net current assets should exceed long-term debt, indicating the company could theoretically cover all obligations with existing liquid assets
Sustainable Growth
- Extended Performance: Earnings must demonstrate at least 30% growth over a ten-year window, showing business durability
- Earnings Normalization: Utilizes three-year earnings averages to minimize temporary fluctuations and focus on fundamental earning power
Reasonable Valuation
- P/E Ceiling: Price-to-earnings ratio (using three-year average earnings) must stay below 15, preventing overpayment
- Dual Valuation Check: The combined total of P/E and price-to-book ratios cannot exceed 22, offering comprehensive valuation protection
Discover how Validea’s models can help you identify high-quality, long-term investments, even in changing market conditions. Visit Validea.com to access in-depth stock analysis and tools designed to emulate proven investment principles. Take a Free Trial Today!
Here are the top 10 stocks using Validea’s Benjamin Graham strategy for April of 2025.
| Ticker | Company Name | Value Investor | Price | Market Cap ($mil) | PE Ratio | Price/ Sales | Relative Strength | Price/ Book | Price/ Cash Flow | Dividend Yield | Long-Term EPS Growth |
|---|---|---|---|---|---|---|---|---|---|---|---|
| BCC | BOISE CASCADE CO | 100 | $95.51 | $3,633 | 10.0 | 0.5 | 37 | 1.7 | 7.0 | 0.7% | 12.4% |
| BG | BUNGE GLOBAL SA | 100 | $80.91 | $10,839 | 10.0 | 0.2 | 41 | 1.1 | 6.6 | 3.3% | -5.4% |
| CRI | CARTER’S INC | 100 | $33.87 | $1,220 | 6.6 | 0.4 | 23 | 1.4 | 5.0 | 9.5% | -1.0% |
| IMKTA | INGLES MARKETS INC | 100 | $61.12 | $1,161 | 14.7 | 0.2 | 46 | 0.7 | 5.7 | 1.1% | -5.8% |
| MLR | MILLER INDUSTRIES INC | 100 | $41.48 | $475 | 7.6 | 0.4 | 46 | 1.2 | 6.1 | 1.8% | 20.1% |
| NUE | NUCOR CORP | 100 | $115.72 | $26,678 | 13.6 | 0.9 | 33 | 1.3 | 6.9 | 1.9% | 11.2% |
| SCVL | SHOE CARNIVAL INC | 100 | $17.99 | $489 | 6.7 | 0.4 | 26 | 0.8 | 4.7 | 3.0% | 12.0% |
| WB | WEIBO CORP (ADR) | 100 | $8.11 | $1,976 | 7.0 | 1.1 | 54 | 0.6 | 5.4 | 10.1% | -4.6% |
| WGO | WINNEBAGO INDUSTRIES INC | 86 | $32.74 | $918 | 0.3 | 26 | 0.8 | 16.6 | 3.9% | -17.7% | |
| UTHR | UNITED THERAPEUTICS CORP | 86 | $291.38 | $13,087 | 11.8 | 4.6 | 79 | 2.0 | 10.3 | 0.0% | 30.0% |
Further Research
