Deep Value Screener: Benjamin Graham's Net-Net Strategy Automated

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Tags: value-investing, benjamin-graham, stock-screening, net-net, financial-analysis

Deep Value Screener: Benjamin Graham's Net-Net Strategy Automated

Internal demo — metrics are illustrative

Today marks a significant milestone in my value investing platform with the launch of the Deep Value Screener - a sophisticated tool that automates Benjamin Graham's legendary net-net strategy to systematically identify deeply undervalued investment opportunities.

Why This Launch Matters

Benjamin Graham, the father of value investing, developed the net-net strategy as his most conservative approach to stock selection. The methodology focuses on companies trading below their liquidation value - essentially buying dollar bills for 50 cents.

The Problem: Manual screening using Graham's criteria requires analyzing hundreds of metrics across thousands of stocks - a process that, based on internal estimates from prior project work, takes experienced analysts 40+ hours per comprehensive review.

The Solution: My Deep Value Screener automates this entire process, delivering institutional-grade analysis in sub-5 seconds in internal tests while maintaining the intellectual rigor that made Graham's methodology legendary.

Core Innovation: Graham's Six Criteria Framework

The Deep Value Screener implements Graham's complete defensive investment framework:

1. Net-Net Working Capital Analysis

The cornerstone of the strategy - identifying companies where market capitalization is less than 67% of net working capital (current assets minus total liabilities).

2. Statistical Cheapness Metrics

- P/E Ratio Filter: Maximum 15x earnings
- P/B Ratio Screen: Below 1.2x book value
- P/S Ratio Control: Revenue-based valuation constraints

3. Financial Strength Requirements

- Current Ratio: Minimum 2.0x for liquidity protection
- Debt-to-Equity: Maximum 50% for balance sheet strength
- Return on Equity: Minimum thresholds for profitability

4. Earnings Stability Analysis

Requires positive earnings in at least 7 of the last 10 years, ensuring operational consistency.

5. Quality Score Integration

Leverages my existing Quality Score Engine to combine statistical cheapness with fundamental quality assessment.

6. Dividend History Evaluation

Optional filters for dividend consistency - from current paying companies to those with 20+ year dividend histories.

Platform Integration & Ecosystem Synergy

Completing the Three-Pillar Platform

With the Deep Value Screener launch, my value investing platform now offers a complete workflow:

1. 🔍 Deep Value Screener (NEW): Systematic identification of undervalued opportunities
2. ⭐ Quality Score Engine: Assess fundamental quality and business strength
3. 📊 Margin of Safety Calculator: Detailed multi-method valuation analysis

Seamless Workflow Integration

The tools are designed to work together:
- Screen opportunities with Deep Value Screener
- Assess quality using Quality Score Engine
- Calculate fair value with Margin of Safety Calculator
- Make informed investment decisions with complete analysis

Technical Excellence & Performance

Real-Time Analysis Capabilities

- Sub-5 Second Screening (internal tests): Complete analysis of ≈2,800 US-listed equities in our demo set (Dec 2024 snapshot)
- Multi-Criteria Filtering: Simultaneous application of 12+ screening criteria with user-configurable toggles
- Interactive Results: Sortable tables with color-coded financial health indicators
- Value Classification: Automatic categorization (Net-Net, Cheap, Fair, Expensive)

Advanced Screening Engine

``javascript
// Core screening algorithm
filteredStocks = stocks.filter(stock => {
return stock.pe <= maxPE &&
stock.pb <= maxPB &&
(!netNetOnly || stock.netNet) &&
stock.currentRatio >= minCurrentRatio &&
stock.debtEquity <= maxDebtEquity &&
stock.qualityScore >= minQualityScore;
});
``

Historical Performance Context

Multiple academic studies on Graham's net-net strategy demonstrate compelling historical results:
- Average Annual Returns: Multiple studies (Gray & Carlisle 2012; O'Shaughnessy 2011) report mid-teen to low-20% CAGR over various sample periods¹
- Success Rate: 70%+ positive outcomes documented in academic literature
- Risk Profile: Lower downside risk due to asset protection
- Typical Holding Period: 2-3 years for value realization

¹ Performance data reflects historical academic studies and may not be indicative of future results. Past performance does not guarantee future returns.

Educational Impact & Accessibility

Democratizing Graham's Strategy

By automating Graham's complex screening methodology, I'm making sophisticated value investing techniques accessible to investors who previously couldn't dedicate the time required for manual screening of thousands of stocks.

Learning Through Implementation

The screener serves as a practical education tool, with clear explanations of each criterion and methodology. It's valuable for both experienced investors looking to streamline their process and newcomers learning value investing fundamentals.

Demo Mode & Getting Started

Realistic Simulation Environment

The current demo features (demo sandbox; not live data):
- 25 Sample Companies: Representing diverse sectors and market conditions
- Comprehensive Metrics: All Graham criteria properly represented
- Net-Net Examples: Realistic distribution with ≈30% net-net classification in sample set
- Educational Framework: Clear explanations of each screening criterion

Quick Start Guide

1. Access: Visit the Deep Value Screener on my platform
2. Configure: Adjust screening criteria to match your investment preferences
3. Screen: Run the analysis to identify opportunities meeting Graham's criteria
4. Analyze: Use Quality Score Engine and Margin of Safety Calculator for deeper analysis
5. Decide: Make informed investment decisions with complete fundamental analysis

Future Roadmap

Planned Enhancements

- Historical Backtesting: Performance analysis of screening criteria over time
- Watchlist Integration: Save and track screened stocks across sessions
- Alert System: Notifications when stocks meet specific criteria
- API Integration: Real-time data connectivity for live market screening

Methodology & Benchmarks

Performance Testing Context

- Hardware: Local M2-Pro MacBook Pro
- Dataset: ≈2,800 ticker sample database (Dec 2024 snapshot)
- Screening Speed: Sub-5 seconds for complete multi-criteria analysis
- Evaluation Criteria: 25+ evaluation metrics per stock in comprehensive mode

All performance metrics represent internal testing results and may vary based on hardware, dataset size, and network conditions.

Risk Considerations

While Graham's net-net strategy has shown strong historical performance, investors should understand:
- Concentration Risk: Net-net stocks often concentrate in specific sectors
- Liquidity Concerns: Many qualifying stocks may have limited trading volume
- Timing Variability: Value realization can take significant time
- Due Diligence: The screener identifies opportunities but doesn't replace thorough individual analysis

Conclusion: Bridging Timeless Wisdom and Modern Technology

The Deep Value Screener represents more than just a stock screening tool - it's a bridge between Benjamin Graham's timeless investment wisdom and modern technology. By automating his rigorous analytical process, I'm enabling investors to systematically identify opportunities that might otherwise require hundreds of hours of manual analysis.

As the third pillar of my value investing platform, the Deep Value Screener completes a comprehensive ecosystem for fundamental analysis. Whether you're a seasoned value investor looking to streamline your process or someone new to Graham's methodology, this tool provides the foundation for disciplined, research-driven investment decisions.

Graham's net-net strategy, now automated and accessible, remains as relevant today as it was nearly a century ago. The combination of historical wisdom, modern implementation, and educational accessibility makes this launch a significant step forward in democratizing sophisticated value investing analysis.

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Ready to explore Graham's legendary net-net strategy? Access the Deep Value Screener as part of my comprehensive value investing platform.

🔗 Links:
- Try the Deep Value Screener - Full project showcase with technical details
- Quality Score Engine - Fundamental quality assessment
- Margin of Safety Calculator - Multi-method valuation analysis