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Benjamin Graham is known as the father of value investing. His screener has been used by many investor, mostly with slight modification. His student Warren Buffet even became the second richest man on earth. In his book, “Security analysis”, he stated that "An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative." Graham’s screener are:
1. PE of the stock has to be less than the inverse of the yield on AAA Corporate
Bonds.
2. PE of the stock has to less than 40% of the average PE over the last 5 years.
3. Dividend Yield > Two-thirds of the AAA Corporate Bond Yield.
4. Price < Two-thirds of Book Value.
5. Price < Two-thirds of Net Current Assets.
6. Debt-Equity Ratio (Book Value) has to be less than one.
7. Current Assets > Twice Current Liabilities.
8. Debt < Twice Net Current Assets.
9. Historical Growth in EPS (over last 10 years) > 7%.
10. No more than two years of negative earnings over the previous ten years.
From the above screener, I conclude that you must choose stocks, which have low price /cheap (screener 1, 2, 3, 4, 5), represents healthy company (6, 7, 8), have growth (9), and have good earning (10). So by looking at those conclusion you can make your own screener.
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