Below are my reflections and answers to the discussion questions posted at Modern Graham for chapter 15 – Stock Selection for the Enterprising Investor – of the Intelligent Investor written by Benjamin Graham.
1. What quote from this chapter do you think best summarizes the point Graham is making?
“But to the objective observer the failure of the funds to better the performance of a broad average is a pretty conclusive indication that such an achievement, instead of being easy, is in fact extremely difficult.”
2. What do you think of Graham’s original requirements for Enterprising Investors? Do you agree with the changes I’ve made for the ModernGraham approach?
To start with, I like Graham’s original requirements for Enterprising Investors. Regarding the changes you’ve made for the ModernGraham approach, I would say I agree with them and that they seem reasonable.
3. Are there any other “modernizations” you would make to Graham’s requirements?
Maybe a shift from net tangible assets to earning power could be deemed reasonable for some companies, and thus setting a maximum earnings multiplier. I’m not really sure what this maximum should be, maybe 25 times normalized earnings per share.
4. What did you think of the chapter overall?