Benjamin Graham Investing Rules: Defensive vs Enterprising

A practical summary of Graham's classic framework from The Intelligent Investor, adapted for quick reference and future stock screening.

Quick Summary

Defensive (Passive): Emphasizes stability, quality, and strict valuation caps.
Enterprising (Active): Allows more flexibility with deeper research and monitoring.
Core idea: Always demand a margin of safety and diversify appropriately.

Toggleable Rules Table

Switch between the defensive and enterprising interpretations of Benjamin Graham's guidelines.

Rule	Defensive (Passive) Guidance
Company size	Large, established companies preferred (e.g., mid/large cap).
Financial condition	Strong balance sheet; current ratio ~2.0+ (industrial); long-term debt not exceeding net current assets (utilities can carry more).
Earnings stability	No earnings deficit in the past 10 years.
Dividend record	Unbroken dividend record for 20+ years.
Earnings growth	At least ~1/3 growth in per-share earnings over the past 10 years, measured using 3-year averages.
Valuation: P/E	Price ≤ 15× average earnings of the past 3 years.
Valuation: P/B (and the 22.5 rule)	Price ≤ 1.5× book. Alternatively, (P/E) × (P/B) ≤ 22.5.
Diversification	Broad diversification across 10–30 stocks.
Cyclical/quality filters	Avoid high-cyclical or speculative issues; prefer consistent profitability.
Margin of safety	Primary principle—buy with ample valuation cushion against adverse scenarios.

Notes: These criteria summarize classic Graham guidelines as commonly interpreted from The Intelligent Investor. They are educational, not investment advice. Modern accounting, sector differences, and data availability may require practical adjustments in any future screen.

Top 20 Graham Candidates

Ranked by blended valuation (P/E × P/B) using normalized earnings (3-year average EPS) when available. This favors lower values; ties break by normalized P/E and then higher dividend yield.

#	Ticker	Stock	PE×PB (3Y EPS)	PE (3Y EPS)	P/B	Div Yield	Price
1	EG	EG	9.97	10.16	0.98	0.02%	362.46
2	NUE	NUE	10.04	6.32	1.59	0.02%	116.71
3	CNC	CNC	8.82	13.57	0.65	0.00%	60.58
4	LYB	LYB	12.12	9.91	1.22	0.12%	74.27
5	BEN	BEN	11.34	11.85	0.96	0.06%	20.15
6	HBAN	HBAN	12.85	12.29	1.05	0.04%	16.27
7	ADM	ADM	11.33	8.51	1.33	0.03%	50.52
8	CFG	CFG	11.13	12.75	0.87	0.03%	43.76
9	COF	COF	11.19	12.87	0.87	0.01%	178.32
10	PFG	PFG	12.79	8.21	1.56	0.04%	77.41
11	ACGL	ACGL	14.37	10.14	1.42	0.06%	92.35
12	MTB	MTB	13.73	13.38	1.03	0.03%	188.01
13	LKQ	LKQ	12.99	10.70	1.21	0.04%	36.75
14	CMCSA	CMCSA	14.35	12.35	1.16	0.04%	37.53
15	EMN	EMN	15.46	12.62	1.22	0.05%	91.32
16	BIIB	BIIB	13.81	11.41	1.21	0.00%	152.92
17	SYF	SYF	15.85	9.73	1.63	0.01%	65.00
18	USB	USB	15.63	13.35	1.17	0.04%	47.83
19	VICI	VICI	16.93	13.89	1.22	0.06%	29.21
20	PHM	PHM	16.38	8.67	1.89	0.01%	108.90

How We'll Build the Graham Stock Screener

We plan to translate these rules into practical, data-driven filters. The screener will let you chooseDefensive or Enterprising mode and automatically surface candidates that meet the criteria. Example mappings:

Financial condition: Current ratio and debt-to-assets from fundamentals; utilities treated separately.
Earnings stability: Detect deficits in trailing 5–10 years using EPS histories.
Dividend record: Continuous dividend history and current yield validity checks.
Valuation: P/E caps, P/B caps, and the blended (P/E × P/B ≤ 22.5) rule.
Quality/cyclicality: Sector tags and profit consistency to reduce highly cyclical exposure for defensive screens.

Note: We will apply strict null/invalid handling similar to our PEGY and P/E rules in the Stock Screener so that bad or missing values are either excluded or demoted consistently.

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Important Notes

These guidelines are educational and adapted from widely cited Graham interpretations.
Modern data classifications and sector specifics may warrant adjustments when screening.
Always pair quantitative screens with qualitative research before investing.