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Value Investing Basics from Ben Graham

·4 min read
  • (1:00) - Learning Value Investing From Benjamin Graham

  • (10:15) - Why Was Ben Graham So Successful

  • (22:30) - Stocks To Keep On Your Radar: Long Term Investing

  • (36:20) - Episode Roundup: NTDOI, BRMK, DHI, MOV, PETS

  •                 Podcast@Zacks.com

 

Welcome to Episode #247 of the Value Investor Podcast.

Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.

Benjamin Graham is often called the “father” of value investing.

But who is he and why should value investors care?

Born in 1894, he was a professor, ran his own Wall Street firm, and was Warren Buffett’s boss.

He also is considered one of the best professional investors of all time.

Graham was also the author of The Intelligent Investor, a book first published in 1949.

Warren Buffett read it at age 19 and said it changed his life.

5 Investing Basics from Ben Graham

The Intelligent Investor is considered to be the best book on value investing every written. The Fourth Edition, which contains Jason Zweig’s additional, more modern, commentary, is about 600 pages long.

It works best when investors dig into just a single chapter.

In the first chapter, Graham and Zweig both lay out 5 investing basics.

1.       A stock is not just a ticker. You actually own a business with underlying value.

2.       The stock market swings between bulls and bears. Have a plan.

3.       The future value of every investment is a function of its present price.

4.       You will be wrong. Have a “margin of safety.”

5.       Develop discipline and courage.

The fifth investing basic sounds so simple. Yet “discipline and courage” is the most difficult part about long-term investing.

Running a Ben Graham Guru Stock Screen

The Zacks Research Wizard, the advanced stock screener that is a separate product from Zacks.com, has predefined “Guru” screens, which includes one following Ben Graham’s investing principles.

This custom screen doesn’t include the value basics like P/E or PEG. It’s more sophisticated and looks at cash flows and other key fundamentals.

This custom screen returned just 14 stocks.

5 Ben Graham Stocks to Keep on Your Watch List

1.       Nintendo NTDOY has sunk 26% in 2021. But shares are now cheap, with a forward P/E of just 15. It also pays a dividend, currently yielding a juicy 4.4%. However, revenue and earnings are expected to decline this year and next. Was 2020 peak earnings?

2.       Broadmark Realty Capital BRMK is a commercial real estate finance company that offers commercial loans, construction loans and land loans to rehabbers and developers. Shares are up just 3.4% year-to-date but it pays a dividend currently yielding 8%. It’s cheap, with a forward P/E of 13.2 and is expected to grow earnings by 22% in 2022.

3.       DR Horton DHI is a national home builder. Shares are up 37% year-to-date on strong housing demand but its still dirt cheap, with a forward P/E of just 8.5. Earnings are expected to rise 74% in fiscal 2021.

4.       Movado MOV is a watch and jewelry maker. In the first quarter, it saw growing demand for watches and jewelry thanks to digital marketing and social media initiatives and its own ecommerce site. It’s cheap, with a forward P/E of 12.4. This is a turnaround story. Are watches still a growth accessory? Stay tuned for second quarter earnings.

5.       Petmed Express PETS is an online pet pharmacy. In the second quarter, sales were down compared to last year’s pandemic surge, and were flat compared to the second quarter of 2019 (pre-pandemic). It struggled in the reopened economy as its online ads were less effective in bringing in new customers and original customers returned to their vets, and purchased products from them. Shares are down 14.5% over the last year.

What else do you need to know about Ben Graham and value investing?

Listen to this week’s Value Investor Podcast to find out.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
PetMed Express, Inc. (PETS): Free Stock Analysis Report
 
D.R. Horton, Inc. (DHI) : Free Stock Analysis Report
 
Movado Group Inc. (MOV) : Free Stock Analysis Report
 
Nintendo Co. (NTDOY) : Free Stock Analysis Report
 
Broadmark Realty Capital Inc. (BRMK) : Free Stock Analysis Report
 
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