Graham's approach focuses on the concept of an intrinsic value that is justified by a firm's assets, earnings, dividends, and financial strength. Focusing on this value, he feels will prevent an investor from being misled by the misjudgments often made by the market during periods of deep pessimism or euphoria.

For investors to have a reasonable chance of better than average results, they must follow policies that are inherently sound and promising, yet different from the policies followed by most investors or speculators. Graham warns that buying a neglected, and therefore undervalued, security for profit generally proves to be a protracted and patience-trying experience. However, the possibility of extraordinary gains only exists when the investor disagrees with market.

While our stock screen covers the analysis and selection of stocks, it is important to keep in mind that Graham's analysis of stocks is framed by the construction and balance of a stock and bond portfolio. A neutral portfolio position will have half of the portfolio in stocks and half in bonds. The proportion can fluctuate from a minimum position of 25% to a maximum position of 75% depending upon the attractiveness of stocks relative to bonds.

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