Did Benjamin Graham suggest that investors pay 30% or less of the Defensive Price?


I've listened to "The Intelligent Investor" now twice and it seemed to me that Benjamin Graham was not suggesting that anyone pay the "Defensive Price," but that the "Defensive Price" was the actual value or fair value of an individual share and that investors should wait until we can get a 30% or more discount below the fair value? Am I understanding Graham correctly? Is the "Defensive Price" the same as the "Intrinsic Value" or "Fair Value" or "Book Value" of a share of stock?

Dear Linus Christopher,

Thank you for your forum post!

30% Below

Graham does not appear to have given such an instruction regarding the Defensive Price (Graham №).

He does mention buying under two-thirds Net Current Asset Value as one of his own strategies, though he did not actually recommend it for his readers. There is also a reference to "asset values of at least two-thirds the market price", which is discussed in that link and is already one of the criteria for Defensive grade stocks.

There are a couple of references to buying "under two-thirds of appraised value" for Enterprising Investors, in the field of preferred stocks and unconventional investments such as secondary issues. The latter should already be covered by the criteria for Enterprising grade stocks.

But there seems to be no such reference regarding the Defensive Price (Graham №). It's possible that the rule you are referring to is either from one of the other references above; or depending on the edition that your audio-book is based on, from Jason Zweig's commentary and not Graham's own text.

Fair Value

There are a couple of references to Fair Value in The Intelligent Investor, and the term seems to be used interchangeably with Intrinsic Value.

The Defensive Price (Graham №) would be the Intrinsic Value of a stock, if the stock also clears all the other requirements for Defensive investment.

Book Value is a standard accounting term, and one of the parameters from which the Defensive Price (Graham №) is derived.

Graham Resources