Stocks Trading Below Their Graham Number – January 2016
One popular approach to investing based on Benjamin Graham’s methods is to use the so-called “Graham Number.” There are some important differences between the Graham Number and the Graham Formula, but using the Graham Number is definitely useful even if the investor only uses it as a screening tactic.
I’ve selected the best companies reviewed by ModernGraham which trade below their Graham Number. The companies selected all are found suitable for the Defensive Investor and/or the Enterprising Investor, and have been valued as undervalued based on the ModernGraham valuation model. Further, the overall screen found 51 companies meeting these criteria, and the full list can be found near the end of this article; however, to cut down on the length of the post, I’ve selected the ten which trade furthest below their Graham Number.
Defensive Investors are defined as investors who are not able or willing to do substantial research into individual investments, and therefore need to select only the companies that present the least amount of risk. Enterprising Investors, on the other hand, are able to do substantial research and can select companies that present a moderate (though still low) amount of risk. Each company suitable for the Defensive Investor is also suitable for Enterprising Investors.
These companies have demonstrated strong financial positions through passing the rigorous requirements of the ModernGraham Investor and show potential for capital growth based on their current price in relation to intrinsic value. As such, these graham number stocks may be a great investment if they prove to be suitable for your portfolio after your own additional research.
It should be noted that I only recently began tracking Graham Number data, though I do have the data for over half of the ModernGraham universe.
Stocks Trading Below Their Graham Number – Citigroup Inc (C)
Citigroup Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years along with the inconsistent dividend history. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $6.47 in 2011 to an estimated gain of $3.81 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.66% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)
Stocks Trading Below Their Graham Number – Lincoln National Corporation (LNC)
Lincoln National Corp qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.80 in 2011 to an estimated $4.65 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.59% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)
Stocks Trading Below Their Graham Number – Metlife Inc (MET)
MetLife Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $3.02 in 2011 to an estimated $4.20 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.45% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)
Stocks Trading Below Their Graham Number – Capital One Financial Corp. (COF)
Capital One Financial Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, while the Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $4.25 in 2011 to an estimated $6.96 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.35% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)
Stocks Trading Below Their Graham Number – Unum Group (UNM)
Unum Group qualifies for either the Enterprising Investor or the more conservative Defensive Investor. In fact, the company passes all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial condition. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $1.89 in 2011 to an estimated $2.72 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.47% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)
Stocks Trading Below Their Graham Number – Legg Mason Inc (LM)
Legg Mason Inc qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings growth or stability over the last ten years along with the high PEmg ratio. The Enterprising Investor is only initially concerned by the insufficient earnings stability over the last five years . As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from a loss of $0.53 in 2012 to an estimated gain of $1.68 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.54% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)
Stocks Trading Below Their Graham Number – SunTrust Banks, Inc. (STI)
SunTrust Banks Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.06 in 2011 to an estimated $3.05 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 2.83% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)
Stocks Trading Below Their Graham Number – Fifth Third Bancorp (FITB)
Fifth Third Bancorp qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.
As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.31 in 2011 to an estimated $1.68 for 2015. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.59% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price. (See the full valuation)
Stocks Trading Below Their Graham Number – National-Oilwell Varco, Inc. (NOV)
National Oilwell Varco Inc. qualifies for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the short dividend record, and the insufficient earnings growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.
As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $4.24 in 2011 to an estimated $4.51 for 2015. This level of demonstrated earnings growth supports the market’s implied estimate of 0.06% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)
Stocks Trading Below Their Graham Number – Western Digital Corp (WDC)
Western Digital Corporation qualifies for both the Defensive Investor and the Enterprising Investor. The Defensive Investor is only concerned with the short dividend history. The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.
As for a valuation, the company appears to be fairly valued after growing its EPSmg (normalized earnings) from $4.74 in 2012 to an estimated $5.98 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 1.98% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price. (See the full valuation)
The Full List
To view the MG Value and PEmg information, you must be logged in as a premium member. Clicking on the company name will take you to the company’s latest valuation.
For the investor type, a “D” indicates the company is suitable for the Defensive Investor, an “E” indicates the company is suitable for the Enterprising Investor, and an “S” indicates the company is considered speculative at this time.
| Ticker | Name with Link | Investor Type | Latest Valuation Date | MG Value | Recent Price | Graham Number | Price as a percent of Graham Number | PEmg Ratio | Div. Yield |
| AFL | AFLAC Incorporated | D | 9/11/2015 | — | $57.45 | $70.80 | 81.14% | — | 2.85% |
| AGCO | AGCO Corporation | E | 11/6/2015 | — | $45.35 | $47.46 | 95.55% | — | 1.06% |
| AIG | American International Group Inc | E | 11/9/2015 | — | $56.12 | $83.90 | 66.89% | — | 2.00% |
| ALL | Allstate Corp | E | 10/29/2015 | — | $58.43 | $70.88 | 82.44% | — | 2.05% |
| ARW | Arrow Electronics, Inc. | E | 12/11/2015 | — | $49.87 | $72.95 | 68.36% | — | N/A |
| BBT | BB&T Corporation | E | 11/16/2015 | — | $31.34 | $42.72 | 73.36% | — | 3.45% |
| BEN | Franklin Resources, Inc. | D | 9/4/2015 | — | $33.20 | $38.91 | 85.33% | — | 2.17% |
| BK | Bank of New York Mellon Corp | E | 1/8/2016 | — | $35.27 | $44.58 | 79.12% | — | 1.93% |
| BWA | BorgWarner Inc. | E | 11/3/2015 | — | $28.72 | $32.43 | 88.56% | — | 1.81% |
| C | Citigroup Inc | E | 12/10/2015 | — | $40.40 | $91.16 | 44.32% | — | 0.50% |
| CF | CF Industries Holdings, Inc. | D | 9/24/2015 | — | $29.76 | $38.66 | 76.98% | — | 4.03% |
| CMA | Comerica Incorporated | E | 10/21/2015 | — | $32.87 | $44.67 | 73.58% | — | 2.56% |
| CMI | Cummins Inc. | D | 12/11/2015 | — | $84.59 | $92.89 | 91.06% | — | 4.61% |
| COF | Capital One Financial Corp. | E | 8/31/2015 | — | $59.79 | $113.72 | 52.58% | — | 2.68% |
| CSCO | Cisco Systems, Inc. | D | 11/4/2015 | — | $23.72 | $23.89 | 99.29% | — | 3.54% |
| DFS | Discover Financial Services | E | 11/5/2015 | — | $48.43 | $53.68 | 90.22% | — | 2.31% |
| F | Ford Motor Company | E | 1/7/2016 | — | $12.16 | $15.60 | 77.95% | — | 4.93% |
| FITB | Fifth Third Bancorp | E | 1/5/2016 | — | $15.23 | $25.61 | 59.47% | — | 3.41% |
| FMC | FMC Corp | D | 9/4/2015 | — | $34.72 | $49.40 | 70.28% | — | 1.90% |
| FOSL | Fossil Group Inc | D | 9/22/2015 | — | $30.95 | $43.21 | 71.63% | — | N/A |
| GHC | Graham Holdings Co | D | 9/21/2015 | — | $460.94 | $559.87 | 82.33% | — | N/A |
| GS | Goldman Sachs Group Inc | E | 11/10/2015 | — | $155.60 | $243.17 | 63.99% | — | 1.67% |
| HBAN | Huntington Bancshares Incorporated | E | 1/4/2016 | — | $7.88 | $11.83 | 66.61% | — | 3.55% |
| IVZ | Invesco Ltd. | D | 1/25/2016 | — | $29.20 | $31.84 | 91.71% | — | 3.70% |
| JPM | JPMorgan Chase & Co. | D | 1/25/2016 | — | $56.63 | $88.61 | 63.91% | — | 3.11% |
| KEY | KeyCorp | E | 11/27/2015 | — | $10.89 | $17.03 | 63.95% | — | 2.75% |
| LEN | Lennar Corporation | E | 11/12/2015 | — | $42.12 | $47.07 | 89.48% | — | 0.38% |
| LM | Legg Mason Inc | E | 12/11/2015 | — | $29.92 | $50.67 | 59.05% | — | 2.67% |
| LNC | Lincoln National Corporation | E | 11/13/2015 | — | $39.26 | $78.23 | 50.19% | — | 2.55% |
| MET | Metlife Inc | E | 10/15/2015 | — | $43.47 | $82.93 | 52.42% | — | 3.45% |
| MTB | M&T Bank Corporation | E | 12/10/2015 | — | $103.15 | $121.10 | 85.18% | — | 2.71% |
| NOV | National-Oilwell Varco, Inc. | E | 10/16/2015 | — | $30.68 | $50.89 | 60.29% | — | 6.00% |
| NTAP | NetApp Inc. | D | 9/24/2015 | — | $21.98 | $22.00 | 99.91% | — | 3.28% |
| PBCT | People’s United Financial, Inc. | E | 12/10/2015 | — | $13.99 | $16.99 | 82.34% | — | 4.79% |
| PFG | Principal Financial Group Inc | E | 11/11/2015 | — | $37.73 | $55.54 | 67.93% | — | 4.03% |
| PHM | PulteGroup, Inc. | E | 1/6/2016 | — | $16.25 | $18.48 | 87.93% | — | 2.22% |
| PNC | PNC Financial Services Group Inc | D | 11/13/2015 | — | $83.75 | $119.49 | 70.09% | — | 2.44% |
| PWR | Quanta Services Inc | E | 10/20/2015 | — | $17.81 | $21.69 | 82.11% | — | N/A |
| STI | SunTrust Banks, Inc. | E | 11/10/2015 | — | $34.67 | $58.63 | 59.13% | — | 2.77% |
| STT | State Street Corp | E | 11/27/2015 | — | $55.56 | $66.44 | 83.62% | — | 2.45% |
| STWD | Starwood Property Trust, Inc. | E | 10/26/2015 | — | $18.38 | $28.55 | 64.38% | — | 10.45% |
| STX | Seagate Technology PLC | E | 9/3/2015 | — | $27.96 | $28.16 | 99.29% | — | 9.01% |
| TRV | Travelers Companies Inc | D | 11/16/2015 | — | $103.43 | $135.83 | 76.15% | — | 2.36% |
| UNM | Unum Group | D | 11/11/2015 | — | $27.96 | $52.46 | 53.30% | — | 2.65% |
| USB | U.S. Bancorp | D | 11/5/2015 | — | $38.81 | $39.50 | 98.25% | — | 2.63% |
| VLO | Valero Energy Corporation | E | 10/20/2015 | — | $66.68 | $84.94 | 78.50% | — | 3.60% |
| WDC | Western Digital Corp | D | 10/20/2015 | — | $45.97 | $73.84 | 62.26% | — | 4.35% |
| WFC | Wells Fargo & Co | D | 12/11/2015 | — | $48.23 | $55.37 | 87.10% | — | 3.11% |
| WNR | Western Refining, Inc. | E | 10/29/2015 | — | $32.27 | $34.85 | 92.60% | — | 4.71% |
| WRK | WestRock Co | D | 9/3/2015 | — | $32.14 | $47.34 | 67.89% | — | 4.67% |
Disclaimer:
The author held a long position in Ford Motor Company but did not hold a position in any other company mentioned in this article at the time of publication and had no specific intention of changing that position within the next 72 hours; however, the author does intend to make some trades in the next 72 hours and may select a company from this list. See my current holdings here. This article is not investment advice and all readers are encouraged to speak to a registered investment adviser prior to making any investing decisions. Please also read our full disclaimer.
