How it works
In The Intelligent Investor, Graham split investors into two types. The "enterprising" investor would do deep research and hunt for bargains. The "defensive" investor wanted adequate returns with very little effort and very little risk. For the defensive investor he set a checklist, and a company had to pass all of it:
- Adequate size — small companies are more fragile. We require total assets above the median of the market.
- Strong finances — current assets at least twice current liabilities.
- Earnings stability — Graham wanted ten years without a loss. We check every recent quarter.
- A dividend record — a company that pays cash is less likely to be dressing up its profits.
- Moderate price — no more than 15× earnings and 1.5× book value. Graham also accepted a trade-off: P/E × P/B up to 22.5.
We rank passing companies by P/E × P/B. Lower is cheaper.
Why it works
The defensive screen doesn't look for hidden gems. It looks for boring — established, profitable, conservatively financed businesses that the market prices as if nothing good will ever happen again. These companies rarely double overnight. They also rarely go to zero. Being able to hold on through a crash matters as much as upside, and quiet balance sheets make holding on easier.
The track record
Graham ran his fund, Graham-Newman, from 1936 to 1956, and its record is the foundation of Buffett's 1984 essay. That essay also shows the partnerships run by Graham's students — Schloss at 21.3%/yr vs 8.4% for the S&P (1956–84), Tweedy Browne at 20.0% vs 7.0% (1968–83) — all built on the same idea: buy solid assets and earnings at a discount.1 Academic research on cheap, profitable, low-debt stocks (see Quality Compounders) points the same way: the combination of cheap and sound has beaten either one alone.
The catch
- Few companies pass. Requiring all six tests at once is strict. In expensive markets the list can be a handful of names — or empty.
- We only see about a year of quarters. That's shorter than Graham's ten-year earnings test. A company with one good year after a bad decade can slip through, so check its longer history yourself.
- Very low P/Es can be one-offs. A P/E of 2 usually means a one-time gain, such as an asset sale. Look at what drove the profit.
Today's darlings
These are the companies that pass the screen right now, ranked the way the screener ranks them. Figures come straight from each company's SEC filings, updated every night. We filter out obvious data oddities (one-time special dividends, blank-check shells, sub-$50M micro-caps) so the list shows names worth a closer look — not recommendations.
See every match, with the arithmetic
Open the screener with Graham Defensive already selected. Free to use; every row explains exactly why it qualified.
Run the Graham Defensive screen- Graham, The Intelligent Investor, ch. 14 (rev. ed. 1973); Buffett, "The Superinvestors of Graham-and-Doddsville" (1984).
Educational content, not investment advice. Past performance — of people, papers, or backtests — doesn't guarantee future results. Do your own homework before buying anything.