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Graham--Defensive Investor (Utility) Screen

Performance

  Graham--Defensive Investor (Utility) S&P 500
YTD Return: 4% 6.7%
Five Year Return: 6.9% 13.3%
Ten Year Return: 7% 5.9%
Inception: 7.7% 4.3%
Data as of 9/30/2014
The Graham--Defensive Investor (Utility) Screen represents AAII's interpretation of the investment approach and is not determined by the original strategist. The list of passing companies represents a hypothetical portfolio, which is used to track the screen’s performance on a chart.

Passing Companies

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Screening Criteria

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Chart

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Value investing is an approach that is widely used today by individual investors and portfolio managers. But the approach was originally formulated some 60 years ago with the publishing of Graham and Dodd's college textbook "Security Analysis." Benjamin Graham is properly credited as one of the "fathers" of value investing. And reviewing the philosophy of the originators can often prove enlightening.

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.

Graham outlines his philosophy for lay investors in his book "The Intelligent Investor," first written in 1947 and updated periodically.

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