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Channeling the Late Great Ben Graham

If Ben Graham were alive to see today's pricey stock market, what would he buy?

Every year I try to pay homage to the man widely considered the father of value investing. Graham was a professor, bon vivant, hedge fund manager, and the author of such books as "The Intelligent Investor." Each August, I try to figure out what he would buy if he were alive today.

The column you're reading represents my 14th such attempt. Of the first 13 columns, 11 beat the Standard & Poor's 500 Index and 10 were profitable.

The average 12-month return on my "Graham" selections has been 22.2%, compared to 10.6% for the index.

My latest column on this subject continued the tradition. Led by EZCorp - a chain of pawn shops, of all things - my Graham-inspired selections rose 13.75% to the S&P's 7.25% from August 11, 2015 through August 11, 2016.

Bear in mind that results for my column picks are theoretical and don't reflect actual trades, trading costs or taxes. The record of my column selections shouldn't be confused with the performance I achieve for clients. And past performance doesn't guarantee future results.

For this column I use a simplified version of Graham's stock-selection criteria. To be considered as a potential "Graham stock," an equity must:

  • Sell for 12 times per-share earnings or less.
  • Sell for 1.0 times book value (corporate net worth per share) or less.
  • Have debt less than 50% of corporate net worth.