Realty Income Corp is not suitable for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is concerned with the low current ratio, the the lack of sufficient earnings growth over the last ten years, and the high PEmg ratio.
National Presto Industries Inc. is suitable for the Enterprising Investor but not for the Defensive Investor. The Defensive Investor is concerned by the low market capitalization, insufficient growth over the last ten years and lack of dividend stability over the last ten years.
AvalonBay Communities is not suitable for either the Defensive Investor or the Enterprising Investor. The Defensive Investor is concerned with the low current ratio, the the lack of sufficient earnings growth over the last ten years, and the high PEmg ratio.
We evaluated 15 different companies this week to determine whether they are suitable for Defensive Investors, those unwilling to do substantial research, or Enterprising Investors, those who are willing to do such research. We also put each company through the ModernGraham valuation model based on Benjamin Graham’s value investing formulas in order to determine an intrinsic value for each. Here’s a summary of the ModernGraham Valuations.
Oracle performs quite well in the ModernGraham model, and is suitable for Enterprising Investors. The Defensive Investor is concerned with the short dividend history and the high PB ratio, while the Enterprising Investor has no initial concerns.
By using the ModernGraham Valuation Model, I’ve selected the five lowest PEmg (price / normalized earnings) companies reviewed by ModernGraham. Each company has been determined to be undervalued and suitable for the Defensive Investor according to the ModernGraham approach. Here’s a summary of each company’s valuation.
Illinois Tool Works should satisfy the Enterprising Investor, but not the Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios, while the Enterprising Investor is only concerned by the level of debt relative to the net current assets.
