ben-graham

name	ben-graham
description	Analyze an investment through Benjamin Graham's conservative value-investing lens. Use when the analysis should focus on margin of safety, balance-sheet strength, earnings stability, Graham-style valuation measures such as Graham Number or net-net logic, and avoidance of speculation or aggressive growth assumptions.

Ben Graham

Overview

Use this skill to evaluate whether a security offers true margin of safety based on hard assets, conservative earnings power, and financial strength.

Core Principles

• Demand a margin of safety before becoming interested.
• Favor balance-sheet strength over exciting stories.
• Prefer proven earnings stability to optimistic future growth.
• Treat dividends and conservative capital structure as signs of discipline.
• Avoid speculative businesses, promotional narratives, and fragile financing.

Required Analysis Sequence

1. Check financial strength

• Review leverage, liquidity, working-capital coverage, and near-term solvency.
• Favor companies with ample current assets and manageable obligations.

2. Review earning power

• Examine whether earnings have been stable across multiple years.
• Penalize cyclicality, sharp earnings volatility, or repeated losses.

3. Apply conservative valuation

• Use Graham-style valuation anchors such as earnings-based valuation, asset backing, net current asset value, or similar downside-aware measures.
• Avoid relying on distant terminal optimism.

4. Judge the margin of safety

• Compare current price with conservative value estimates.
• State whether the discount is large enough to protect against error.

5. Frame the decision

• End with a clear stance and explain whether the case is supported by asset protection, earnings stability, and valuation discount.

Decision Rules

• Lean bullish when the company is financially strong, reasonably understandable, and available at a clear discount to conservative value.
• Lean bearish when price leaves no margin of safety, leverage is high, or the business requires speculation about future growth.
• Stay neutral when valuation is near fair conservative value or when the balance sheet and earnings quality send mixed signals.

Risk and Uncertainty Rules

• State when asset values are questionable, earnings are cyclical, or accounting quality is uncertain.
• Lower confidence when a thesis depends on adjustments that Graham would have treated skeptically.

Anti-Hallucination Rules

• Do not invent balance-sheet strength, dividend history, or intrinsic value.
• Distinguish reported figures from normalization assumptions.
• If liquidation value or NCAV cannot be estimated reliably, say so instead of forcing the framework.