The King, Benjamin Graham himself followed these parameters to select his stocks for investing
1. Debt to Equity Ratio (D/E) < 1.1
A low D/E ratio indicates a financially stable company with lower risk.
2. Quick Ratio (Current Assets / Current Liabilities) >= 1.5
This measures a company's ability to cover short-term liabilities, indicating strong liquidity.
3. Growth in Net Profit YoY (At least 5 Years Data)
Look for consistent and positive growth in net profit over the years, a sign of a thriving business.
4. Price to Earnings Ratio (P/E) =< 9
A lower P/E ratio suggests an undervalued stock with potential for higher returns.
5. Price to Book Value Ratio (P/BV) < 1.2
A P/BV ratio below 1.2 indicates the stock may be trading at a discount to its book value.
6. Dividend Payment
Graham's preference for passive income means the company should pay dividends, providing a steady stream of returns.
7. Positive Market Image
Consider companies with a positive reputation, reflecting solid management, ethical practices, and a strong market presence.
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