I wish we could revive Benjamin Graham for a strategic group.
Graham (1884-1976), hedge fund manager, author, and professor at Columbia University. He is widely regarded as the father of price investing (essentially, the pursuit of reduced prices).
His style, which I favor, worked well for most of eight decades, but struggled in the 16 years after the Great Recession. What would Graham say if he could talk to us now? I suspect he would say to keep the faith, because reasonable actions will do well in the long run.
Every year I buy a few shares that I think the master could buy if he were alive today.
My “Graham Picks” last year were up just 9. 0%, the Standard & Poor’s 500 Total Return Index up 20. 8%. Seaboard Corp. ‘s 14% (SEB) loss hurt performance. The best performing actor was U. S. Steel Corp. , with an increase of 33%.
For 21 years, my Graham-inspired picks have received an average of 15. 5% endorsement, adding up to dividends. This exceeds the average retracement of the S
My attempts to channel Graham’s ghost rate 14 out of 21 times and have also been successful 14 times.
Please note that the effects of my columns are hypothetical and do not deserve to be hypothetical with the effects I obtain for clients. Furthermore, beyond functionality it is not a predictor of the future.
Unfortunately, we can’t bring the real Ben Graham back to life, but in a simplified edition of his criteria, here are some moves I think you might like today.
Each of those percentages sells for 12 times the company’s earnings per percentage or less. The average inventory currently has a value of around 24.
Each has debt less than 50% of the company’s net (the average is greater than 100%) and an inventory cost less than the cost of the ebook or net of the company (the average is approximately twice the cost of the ebook ).
I’ll start with Unum Group (UNM), a disability insurance specialist. I chose it as my Graham strain in 2022 and it rewarded me with a 30% return. Today, once back, I think the teacher can appreciate it. because it sells for almost 8 times its profits and has a debt that represents 33% of the company’s net worth.
False or questionable claims plague disability insurers during recessions. Who knows, the next recession will come. But despite recent fears, I don’t expect any anytime soon.
Bank OZK (OZK) is a regional bank headquartered in Little Rock, Arkansas and in 8 states.
Many other people would consider OZK Bank to be a risky investment, for several reasons. It has a clever twist on real estate loan advertising and disruptions with office buildings in the Covid and post-Covid era are well known. In addition, the bank has expanded into new territories and new types of loans.
I think Graham finds the risks acceptable. Inventory sells for seven times earnings, and debt accounts for only 16% of the company’s equity.
New York-based G-III Apparel Group Ltd. (GIII) manufactures clothing under the Calvin Klein, Donna Karan, DKNY, Karl Lagerfeld and Tommy Hilfiger brands, as well as a number of personal labels. It has been successful in 14 of the last 15 years.
The “rag business” is known for its low profit margins, but the G-III margin is poor, 5. 8% after taxes. Several fund managers I respect own the stock, including Caxton Associates, Jeremy Grantham, Joel Greenblatt, and Chuck Royce. .
Investors look down on coal companies because coal is a highly polluting fuel and coal mining companies have a history of abnormal profits. However, I believe that the growing demand for electricity from knowledge centres will increase the viability of coal companies until the 2030s.
One of the largest is Peabody Energy Corp. (BTU). Peabody has posted six losses in the last ten years, but has maintained three consecutive years of profits. Analysts expect the company to be successful in 2024, 2025 and 2026. The stock sells for six times earnings and the company’s debt is low. .
Refining is a cyclical business, but HF Sinclair Corp. (DINO) has made thirteen wins in the last 15 years and has been very successful lately. The advent of electric cars poses a risk to refineries (which will sell less gasoline), although it is imminent. risk in my opinion.
Graham would like a price-to-earnings ratio of seven and a dividend yield of 4. 1%.
Disclosure: I do not own the stocks discussed in today’s column. I own shares in OZK Bank for a client.
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