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

Even though 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.

## Example - U.K.

This discussion will demonstrate such a 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%*.

#### Size in Sales = 80%

A *Size in Sales* filter value of *80%* yields a *Sales* figures of *£400 million*.

#### Sales = £400 million

### 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%*.

#### Size in Assets = 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.

#### Total Assets = £200 million

## 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. 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%

### Intrinsic Value(%)

#### a. Defensive

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

#### Intrinsic Value(%) = 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

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

#### Intrinsic Value(%) = 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.