{"id":42399,"date":"2023-11-05T12:35:12","date_gmt":"2023-11-05T12:35:12","guid":{"rendered":"https:\/\/innodebt.com\/investing\/12-warren-buffett-style-stocks-with-a-margin-of-safety\/"},"modified":"2023-11-05T12:35:14","modified_gmt":"2023-11-05T12:35:14","slug":"12-warren-buffett-style-stocks-with-a-margin-of-safety","status":"publish","type":"post","link":"https:\/\/innodebt.com\/?p=42399","title":{"rendered":"12 Warren Buffett Style Stocks With A Margin Of Safety"},"content":{"rendered":"
\n

Ben Graham influenced a host of billionaire investing titans, from the Oracle of Omaha to Seth Klarman, David Tepper and Mario Gabelli. Here are defensive stocks he would love.<\/h2>\n

By <\/sub>John Dobosz<\/sub>, Forbes Staff<\/sub><\/h3>\n

B<\/abbr>efore he became a mega-billionaire solely through his investment skill, and after he earned his bachelor\u2019s degree from the University of Nebraska in 1949, Warren Buffett took his talents to the Morningside Heights neighborhood on the upper west side of Manhattan to earn his master\u2019s degree in business from Columbia University, studying under the tutelage of Professor Benjamin Graham, widely known as the \u201cfather of value investing.\u201d<\/p>\n

More than 15 years prior to Buffett\u2019s arrival on the Columbia campus, Graham co-authored Security Analysis<\/em> with fellow Columbia professor David Dodd\u2014a book widely considered the seminal investing treatise published after the enactment of the Securities Exchange Act of 1934.<\/p>\n

Before the establishment of the Securities and Exchange Commission, flim-flam artists and stock scammers ruled the roost on Wall Street and were given few disincentives to making up numbers regarding the operating results of companies they were promoting. Once the reporting of financial information was standardized and required by federal law, it provided a basis for evaluating companies based on things like earning power, efficiency with assets and stockholder equity, and other real-world measures of financial performance.<\/p>\n

Before his death in 1976, Graham went on to publish several more books on how to spot attractive investments, perhaps none more consequential than The Intelligent Investor<\/em>, in 1949. In this still-influential investment tome, Graham addressed the idea that there were two types of investors: aggressive or enterprising and defensive. Defensive investors are the most risk averse.<\/p>\n

For defensive investors, Graham advised not to consider buying stocks trading above 15 times earnings per share, or more than 1.5 times book value per share. Book value, also called shareholder\u2019s equity, is the difference between assets and liabilities. Combining these two provisos into an equation and solving for the geometric mean yields the so-called \u201cGraham number\u201d: a price above which a defensive investor should not pay for a stock. Graham believed that it was better to be conservative and to select only stocks priced by a margin of safety below their intrinsic value.<\/p>\n

<\/fbs-ad><\/p>\n

\u201cThere is nothing wrong per se with having a valuation governor on one’s stock analysis, but the Graham number is far too simplistic to be employed en masse<\/em>, especially in the current climate where Book Value can be a moving target,\u201d says John Buckingham, long-time value investor and editor of The Prudent Speculator <\/em>newsletter. \u201cThink of the hold-till-maturity assets on bank balance sheets or all the goodwill companies have accumulated from acquisitions that could be written down or written up.\u201d<\/p>\n

Buckingham makes a good point regarding the book value of financial firms, so in the stocks presented below with a stock price below the Graham number, we exclude any company from the financial sector. It may remove from consideration some attractively priced banks, but it will also limit the possibility of incorporating bad data into our valuations.<\/p>\n

\u201cWhen screening for value in the Russell 2000 index, I like to first filter out stocks with the Graham formula, and this alone has generated an additional 5% annual return over the benchmark while greatly enhancing the Sharpe Ratio, \u201csays Kurtis Hemmerling, equity factor model designer at Portfolio123, a company that advises hedge funds, ETFs, and family offices on fundamental data used in building models. \u201cWhen I overlay the Graham number with a Graham-esque<\/em> multifactor ranking system, the top 15 stocks add an additional 7% annual return yet again, so I find these to be fantastic principles to build a solid fundamental strategy.\u201d<\/p>\n

The 12 stocks shown below trade at prices below their \u201cGraham number\u201d and they all pay dividends that are covered comfortably by free cash flow over the past 12 months. For defensive investors willing to tap into deep value, a reliable dividend is usually part of the tradeoff for potentially explosive growth, so yield is also a requirement. We also excluded companies with a debt-to-equity ratio of more than 60%, those with negative earnings or book value, and required companies to trade below their five-year median enterprise value-to-Ebitda ratio, a number that considers the impact of debt and equity when evaluating operating earnings efficiency.<\/p>\n

Worrywart Stocks<\/strong><\/h2>\n

Warren Buffett\u2019s mentor counseled defensive investors never to pay more than 15 times earnings or 1.5 times book value for a stock. These 12 names, ranked by debt-to equity ratio (low to high), all make the grade.<\/h4>\n

Based on these criteria, the biggest bargain appears to be Jackson, Miss.-based Cal-Maine Foods<\/strong> (CALM), which produces, grades, packs, markets, and distributes fresh shell eggs to national and regional grocery store chains, club stores, foodservice distributors, and egg product manufacturers in the United States. It owns operating farms, processing plants, hatcheries, feed mills, warehouses and other properties. Over the past 12 months, Cal-Maine generated revenue of $3.15 billion and earnings of $15.52 per share. Cal-Maine was minting money in 2022 when the average price of grade A eggs topped out at $4.82 per dozen in January. Last month, one dozen eggs was averaging $2.06 a dozen\u2014still more than 15% above the 2016-2022 average.<\/p>\n

As lending rates fell for the first time in seven weeks to 7.76% for a 30-year mortgage, two nationally prominent home builders also made the cut: Atlanta-based PulteGroup<\/strong> (PHM) and Horsham, Pa.-based Toll Brothers<\/strong> (TOL).<\/p>\n

<\/fbs-ad><\/p>\n

MORE FROM FORBES<\/strong><\/h4>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Ben Graham influenced a host of billionaire investing titans, from the Oracle of Omaha to Seth Klarman, David Tepper and Mario Gabelli. Here are defensive stocks he would love. By John Dobosz, Forbes Staff Before he became a mega-billionaire solely through his investment skill, and after he earned his bachelor\u2019s degree from the University of […]<\/p>\n","protected":false},"author":1,"featured_media":42400,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[32],"tags":[],"class_list":{"0":"post-42399","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-investing"},"yoast_head":"\n12 Warren Buffett Style Stocks With A Margin Of Safety | Innodebt<\/title>\n<meta name=\"description\" content=\"Ben Graham influenced a host of billionaire investing titans, from the Oracle of Omaha to Seth Klarman, David Tepper and Mario Gabelli. Here are defensive\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/innodebt.com\/?p=42399\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"12 Warren Buffett Style Stocks With A Margin Of Safety | Innodebt\" \/>\n<meta property=\"og:description\" content=\"Ben Graham influenced a host of billionaire investing titans, from the Oracle of Omaha to Seth Klarman, David Tepper and Mario Gabelli. Here are defensive\" \/>\n<meta property=\"og:url\" content=\"https:\/\/innodebt.com\/?p=42399\" \/>\n<meta property=\"og:site_name\" content=\"Innodebt\" \/>\n<meta property=\"article:published_time\" content=\"2023-11-05T12:35:12+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-11-05T12:35:14+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/innodebt.com\/wp-content\/uploads\/2023\/11\/1699187712_0x0.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1600\" \/>\n\t<meta property=\"og:image:height\" content=\"900\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"News Room\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"News Room\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/innodebt.com\/?p=42399#article\",\"isPartOf\":{\"@id\":\"https:\/\/innodebt.com\/?p=42399\"},\"author\":{\"name\":\"News Room\",\"@id\":\"https:\/\/innodebt.com\/#\/schema\/person\/742362d9a293429cc45829acf21919b4\"},\"headline\":\"12 Warren Buffett Style Stocks With A Margin Of Safety\",\"datePublished\":\"2023-11-05T12:35:12+00:00\",\"dateModified\":\"2023-11-05T12:35:14+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\/\/innodebt.com\/?p=42399\"},\"wordCount\":902,\"commentCount\":0,\"publisher\":{\"@id\":\"https:\/\/innodebt.com\/#organization\"},\"articleSection\":[\"Investing\"],\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"CommentAction\",\"name\":\"Comment\",\"target\":[\"https:\/\/innodebt.com\/?p=42399#respond\"]}]},{\"@type\":\"WebPage\",\"@id\":\"https:\/\/innodebt.com\/?p=42399\",\"url\":\"https:\/\/innodebt.com\/?p=42399\",\"name\":\"12 Warren Buffett Style Stocks With A Margin Of Safety | Innodebt\",\"isPartOf\":{\"@id\":\"https:\/\/innodebt.com\/#website\"},\"datePublished\":\"2023-11-05T12:35:12+00:00\",\"dateModified\":\"2023-11-05T12:35:14+00:00\",\"description\":\"Ben Graham influenced a host of billionaire investing titans, from the Oracle of Omaha to Seth Klarman, David Tepper and Mario Gabelli. Here are defensive\",\"breadcrumb\":{\"@id\":\"https:\/\/innodebt.com\/?p=42399#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\/\/innodebt.com\/?p=42399\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\/\/innodebt.com\/?p=42399#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\/\/innodebt.com\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"12 Warren Buffett Style Stocks With A Margin Of Safety\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\/\/innodebt.com\/#website\",\"url\":\"https:\/\/innodebt.com\/\",\"name\":\"Funding Factories\",\"description\":\"Latest Finance News and Updates\",\"publisher\":{\"@id\":\"https:\/\/innodebt.com\/#organization\"},\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/innodebt.com\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-US\"},{\"@type\":\"Organization\",\"@id\":\"https:\/\/innodebt.com\/#organization\",\"name\":\"Funding Factories\",\"url\":\"https:\/\/innodebt.com\/\",\"logo\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/innodebt.com\/#\/schema\/logo\/image\/\",\"url\":\"https:\/\/innodebt.com\/wp-content\/uploads\/2023\/08\/ff-dark-logo-1.png\",\"contentUrl\":\"https:\/\/innodebt.com\/wp-content\/uploads\/2023\/08\/ff-dark-logo-1.png\",\"width\":780,\"height\":140,\"caption\":\"Funding Factories\"},\"image\":{\"@id\":\"https:\/\/innodebt.com\/#\/schema\/logo\/image\/\"}},{\"@type\":\"Person\",\"@id\":\"https:\/\/innodebt.com\/#\/schema\/person\/742362d9a293429cc45829acf21919b4\",\"name\":\"News Room\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\/\/innodebt.com\/#\/schema\/person\/image\/\",\"url\":\"https:\/\/innodebt.com\/wp-content\/uploads\/2023\/08\/avatar_user_1_1693518183-96x96.png\",\"contentUrl\":\"https:\/\/innodebt.com\/wp-content\/uploads\/2023\/08\/avatar_user_1_1693518183-96x96.png\",\"caption\":\"News Room\"},\"sameAs\":[\"https:\/\/innodebt.com\"],\"url\":\"https:\/\/innodebt.com\/?author=1\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"12 Warren Buffett Style Stocks With A Margin Of Safety | Innodebt","description":"Ben Graham influenced a host of billionaire investing titans, from the Oracle of Omaha to Seth Klarman, David Tepper and Mario Gabelli. Here are defensive","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/innodebt.com\/?p=42399","og_locale":"en_US","og_type":"article","og_title":"12 Warren Buffett Style Stocks With A Margin Of Safety | Innodebt","og_description":"Ben Graham influenced a host of billionaire investing titans, from the Oracle of Omaha to Seth Klarman, David Tepper and Mario Gabelli. Here are defensive","og_url":"https:\/\/innodebt.com\/?p=42399","og_site_name":"Innodebt","article_published_time":"2023-11-05T12:35:12+00:00","article_modified_time":"2023-11-05T12:35:14+00:00","og_image":[{"width":1600,"height":900,"url":"https:\/\/innodebt.com\/wp-content\/uploads\/2023\/11\/1699187712_0x0.jpg","type":"image\/jpeg"}],"author":"News Room","twitter_card":"summary_large_image","twitter_misc":{"Written by":"News Room","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/innodebt.com\/?p=42399#article","isPartOf":{"@id":"https:\/\/innodebt.com\/?p=42399"},"author":{"name":"News Room","@id":"https:\/\/innodebt.com\/#\/schema\/person\/742362d9a293429cc45829acf21919b4"},"headline":"12 Warren Buffett Style Stocks With A Margin Of Safety","datePublished":"2023-11-05T12:35:12+00:00","dateModified":"2023-11-05T12:35:14+00:00","mainEntityOfPage":{"@id":"https:\/\/innodebt.com\/?p=42399"},"wordCount":902,"commentCount":0,"publisher":{"@id":"https:\/\/innodebt.com\/#organization"},"articleSection":["Investing"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/innodebt.com\/?p=42399#respond"]}]},{"@type":"WebPage","@id":"https:\/\/innodebt.com\/?p=42399","url":"https:\/\/innodebt.com\/?p=42399","name":"12 Warren Buffett Style Stocks With A Margin Of Safety | Innodebt","isPartOf":{"@id":"https:\/\/innodebt.com\/#website"},"datePublished":"2023-11-05T12:35:12+00:00","dateModified":"2023-11-05T12:35:14+00:00","description":"Ben Graham influenced a host of billionaire investing titans, from the Oracle of Omaha to Seth Klarman, David Tepper and Mario Gabelli. Here are defensive","breadcrumb":{"@id":"https:\/\/innodebt.com\/?p=42399#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/innodebt.com\/?p=42399"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/innodebt.com\/?p=42399#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/innodebt.com\/"},{"@type":"ListItem","position":2,"name":"12 Warren Buffett Style Stocks With A Margin Of Safety"}]},{"@type":"WebSite","@id":"https:\/\/innodebt.com\/#website","url":"https:\/\/innodebt.com\/","name":"Funding Factories","description":"Latest Finance News and Updates","publisher":{"@id":"https:\/\/innodebt.com\/#organization"},"potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/innodebt.com\/?s={search_term_string}"},"query-input":"required name=search_term_string"}],"inLanguage":"en-US"},{"@type":"Organization","@id":"https:\/\/innodebt.com\/#organization","name":"Funding Factories","url":"https:\/\/innodebt.com\/","logo":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/innodebt.com\/#\/schema\/logo\/image\/","url":"https:\/\/innodebt.com\/wp-content\/uploads\/2023\/08\/ff-dark-logo-1.png","contentUrl":"https:\/\/innodebt.com\/wp-content\/uploads\/2023\/08\/ff-dark-logo-1.png","width":780,"height":140,"caption":"Funding Factories"},"image":{"@id":"https:\/\/innodebt.com\/#\/schema\/logo\/image\/"}},{"@type":"Person","@id":"https:\/\/innodebt.com\/#\/schema\/person\/742362d9a293429cc45829acf21919b4","name":"News Room","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/innodebt.com\/#\/schema\/person\/image\/","url":"https:\/\/innodebt.com\/wp-content\/uploads\/2023\/08\/avatar_user_1_1693518183-96x96.png","contentUrl":"https:\/\/innodebt.com\/wp-content\/uploads\/2023\/08\/avatar_user_1_1693518183-96x96.png","caption":"News Room"},"sameAs":["https:\/\/innodebt.com"],"url":"https:\/\/innodebt.com\/?author=1"}]}},"_links":{"self":[{"href":"https:\/\/innodebt.com\/index.php?rest_route=\/wp\/v2\/posts\/42399","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/innodebt.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/innodebt.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/innodebt.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/innodebt.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=42399"}],"version-history":[{"count":1,"href":"https:\/\/innodebt.com\/index.php?rest_route=\/wp\/v2\/posts\/42399\/revisions"}],"predecessor-version":[{"id":42401,"href":"https:\/\/innodebt.com\/index.php?rest_route=\/wp\/v2\/posts\/42399\/revisions\/42401"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/innodebt.com\/index.php?rest_route=\/wp\/v2\/media\/42400"}],"wp:attachment":[{"href":"https:\/\/innodebt.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=42399"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/innodebt.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=42399"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/innodebt.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=42399"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}