Customizing the seventeen-rule framework of Benjamin Graham — Warren Buffett's mentor — for non-U.S. currencies, bond yields and inflation rates.

## Example - U.K.

Although Graham's framework comprises primarily of ratios that are self-calibrating, there are a few region-specific parameters that may need to be customized if one is investing in countries other than the United States.

Shown below is one such customization using the currency conversion rates, interest rates and *Consumer Price Index (CPI)* values of the United Kingdom.

## 1. Size in Sales

The first region-specific parameter in Graham's framework is the *Size* rating.

Graham recommended a minimum *Sales* figure of *$100 million* for *Defensive* grade stocks, which works out to around *$500 million* today based on the increase in *CPI* in the United States.

Since the *Pound Sterling (GBP)* is worth roughly *1.28* times the *United States Dollar (USD)* today, and since *Serenity* lists values for U.K. stocks in *GBP*, the *Sales* rating will simply need to be reduced by *1.28* times to screen for *Defensive* grade U.K. stocks.

*100 ÷ 1.28 = 78%*

*500 ÷ 1.28 = 390*

This yields a *Sales* figures of *£390 million*, which corresponds exactly to the *$500 million* required for a U.S. stock. Rounding up yields a *Size in Sales* filter value of *80%*. A *Size in Sales* filter value of *80%* yields a *Sales* figures of *£400 million*.

### Size in Sales = 80%

### 1a. Size in Assets

For *Public-Utilities* and *Financial Enterprises* in the U.S., Graham recommended a *Total Assets* figure of *$50 million* which works out to $*250 million* today.

A similar calculation yields a *Size in Assets* filter value of *80%*. A *Size in Assets* filter value of *80%* yields a *Total Assets* figures of *£200 million*, which corresponds closely to the *$250 million* required for U.S. stocks.

### Size in Assets = 80%

## 2. Earnings Growth

An *Earnings Growth* rating of *100%* on *Serenity* corresponds to an actual earnings growth of *33%* over the past ten years, just as Graham recommended for U.S. stocks.

Since the change in *CPI* in the U.K. over the last decade is almost identical to this number — *32%* — this rating requires no real adjustment for the U.K. (and actually requires adjustment today in the U.S.).

### Earnings Growth = 100%

## 3. Intrinsic Value

*Intrinsic Value* is the price corresponding to a stock's *Graham Grade*: *Defensive*, *Enterprising* or *NCAV (Net-Net)*.

### a. Defensive

The *Intrinsic Value* of a *Defensive* grade stock is the same as its *Graham Number*.

A *Graham Number(%)* of *70%* on *Serenity* corresponds to the 10-year AA corporate bond yield of *3.3%* in the U.S. today.

Since similar bond yields in the U.K. are now close to *2.3%*, this allows for a *P/E* ratio of up to *43*. The *Graham Number* of a stock would need to be multiplied by *1.70* to adjust it to a *P/E* of *43*. This corresponds to an *Graham Number(%)* of *59%* on *Serenity*, which can be rounded up to *60%*.

### Graham Number(%) = 60%

### b. Enterprising

*Enterprising* grade stocks too would need to have their *Intrinsic Value(%)* adjusted similarly, as both calculations are based on similar principles.

### Intrinsic Value(%) = 60%

### c. NCAV (Net-Net)

NCAV figures are calculated based on assets alone, and so *NCAV (Net-Net)* grade stocks do not require having their *Intrinsic Value(%)* adjusted.

### NCAV or Net-Net(%) = 100%

## Graham Stock Screeners

The below links will open the *Classic Graham Screener* and *Advanced Graham Screener* with all U.K. exchanges selected. The *Advanced Graham Screener* will have the adjusted parameters discussed above selected as well.

## Warren Buffett

All else being equal, the location of a company does not affect the evaluation of its investment worthiness. The same framework can applied across countries and regions. Warren Buffett says:

*Submitted by serenity. Updated on Friday 29th May 2020.*