## Benjamin Graham's investing rules.

Benjamin Graham is considered the father of modern value investing and was Warren Buffett's teacher. Here are his original investing rules. Some of the concepts behind these rules form the basis of our strategy:

**1. **An earnings-to-price yield at least twice the AAA bond rate. If the AAA bond yield is 6%, then the required earnings yield is 12%.

**2.** Price-to-earnings (P/E) ratio less than 40% of the highest P/E ratio the stock had over the past 5 years.

**3. **Dividend yield at least two thirds the AAA bond yield. If the AAA bond yield is 3%, then the dividend yield must be at least 2%.

**4.** Stock price below two thirds of tangible book value per share.

**5.** Stock price below two thirds of Net Current Asset Value (NCAV).

**6.** Total debt must be less than book value.

**7.** Current ratio must be greater than 2.

**8.** Total debt is less than 2 times NCAV.

**9.** Average compounded earnings growth of prior 10 years at least 7% annually.

**10.** No more than 2 declines of 5% or more in year-end earnings in the prior 10 years are permissible.