Benjamin Graham Investment Analysis Prompt

A complete Graham-style investment analysis framework. Covering eight key dimensions: fundamental analysis, margin of safety, Mr. Market psychology, defensive investing principles, and value identification. Use AI to analyze stocks through Graham's disciplined approach and protect capital with conservative investing principles.

Full Prompt Content

Classic Investment Rules
Deep dive into the timeless investment principles that have guided generations of successful investors.
Seek Professional Help
The defensive investor needs to seek professional advice.
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Long-term Perspective
The investor should be guided by long-term considerations and not by short-term market fluctuations.
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Rebalancing
The investor should periodically rebalance his portfolio to maintain the desired asset allocation.
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Avoid Speculation
The defensive investor will avoid the temptation to stray into the unknown in search of higher returns.
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Index Funds
An index fund is the best choice for the investor who cannot or does not want to devote time to security selection.
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Getting Started
What is the 'margin of safety' and why is it important?
Margin of safety is the gap between intrinsic value and market price. Graham recommends buying only when market price is at least 33% below intrinsic value. This protects you from estimation errors and unforeseen problems.
Who is Mr. Market and what does he represent?
Mr. Market is Graham's metaphor for market behavior - an emotional business partner who offers daily prices. Sometimes he's optimistic (high prices), sometimes depressed (low prices). The key is to exploit his irrationality, not participate in it.
What is the difference between a 'defensive' and 'enterprising' investor in Graham's framework?
Defensive investors seek safety and minimal effort with diversified portfolios of high-quality bonds and blue-chip stocks. Enterprising investors actively seek undervalued stocks but must commit more time and research. Graham believed most people should be defensive investors, as the enterprising path demands significant analytical skill and emotional discipline.
How to Use
What are Graham's defensive investor criteria?
Graham requires: (1) Size - large, established companies, (2) Financial condition - current ratio above 2, debt below 50% of equity, (3) Earnings stability - positive earnings for 10 years, (4) Dividend record - at least 20 years of continuous dividends, (5) Earnings growth - at least 33% over 10 years, (6) Moderate P/E - below 15x, (7) Moderate P/B - below 1.5x.
What is a net-net stock?
A net-net stock trades below its net current asset value (current assets minus total liabilities). Graham considered these 'bargain' stocks because you're buying at less than liquidation value. They're rare but offer substantial upside with limited downside.
Advanced Questions
Are Graham's valuation criteria too strict for modern markets?
Some specific thresholds like P/E below 15 may need adjustment for today's low-interest-rate era and asset-light businesses, but the core principle of buying below intrinsic value with a margin of safety remains timeless. The prompt adapts these principles contextually while preserving Graham's conservative philosophy.
How does this prompt handle companies with negative earnings?
Graham was cautious about unprofitable companies. The prompt flags them as high-risk and suggests focusing on balance sheet strength and debt levels instead. It evaluates whether the company has sufficient tangible assets, cash reserves, and a credible path back to profitability before considering any investment.