Screening Large Companies Adjusted for Inflation

The Sales and Assets criteria for company size in the Value Investing framework of Benjamin Graham — Warren Buffett's mentor — are $500 million and $250 million today.

Criteria For Size

Graham's framework states that a stock for Defensive investment should have:

"Not less than $100 million of annual sales... not less than $50 million of total assets for a public utility."

Benjamin Graham, Chapter 14: Stock Selection for the Defensive Investor, The Intelligent Investor.

Inflation Adjustment

When adjusted for Inflation — or the increase in the Consumer Price Index (CPI) — since the time the above was written in 1971, these figures work out to $500 million and $250 million respectively. These are the default selection criteria today on GrahamValue.

Graham does not seem to have recommended using Market Capitalization.

Further Customization

The sliders on the Advanced Graham Screener allow further customization of Graham's criteria as well.

a. Size in Sales (100% ⇒ 500 Million)

A value of 100% on the Size in Sales filter implies a Sales value of 500 Million. The filter moves in steps of 20% which corresponds to increments of 100 Million each.

b. Size in Assets (100% ⇒ 250 Million)

Similarly, a value of 100% on the Size in Assets filter implies a Total Assets value of 250 Million. This filter too moves in steps of 20%, which corresponds to increments of 50 Million each.

As an example, setting Size in Sales to 140% will show stocks with 700 million or more in Sales (in the listed currency).

Buffett About Graham

At the Berkshire Hathaway 2018 Annual Shareholders Meeting, Buffett said that he would rather hire someone who truly understands Benjamin Graham's book — The Intelligent Investor — over a top business school graduate.

Comments

Hello Serenity

Would you consider updating the 1971 values to today's inflated values

https://www.bls.gov/data/inflation_calculator.htm

this would roughly be 7 times the $100 & $50 million value, or 700 & 350 million

(how sad for those on fixed incomes!)

Dear Tranquility,

Thank you for your comment!

You're correct. The 5x multiplier for inflation is from when GrahamValue was first launched for the U.S. market in 2012. The inflation multiplier now would probably be closer to 7x.

However, this also varies across regional economies. So, for the moment, this has been left to the user to customize as shown in the example above.

Thank you again for your comment!