The Sales and Assets criteria for company size in the Value Investing framework of Benjamin Graham — Warren Buffett's mentor — need to be adjusted using the Consumer Price Index.
Criteria For Size
Graham's framework states that a stock for Defensive investment should have:
"Not less than $100 million of annual sales... not less than $50 million of total assets for a public utility."
Benjamin Graham, Chapter 14: Stock Selection for the Defensive Investor, The Intelligent Investor.
Note: Graham does not seem to have recommended using Market Capitalization.
Inflation Adjustment
When adjusted for Inflation — or the increase in the Consumer Price Index (CPI) — since the time the above was written in 1971, these figures work out to $500 million and $250 million respectively. These are the default selection criteria today on GrahamValue.
Note: Non-U.S. economies such as the U.K. may require different values for these criteria.
2022 Update
The above default values were created when GrahamValue was founded in 2012.
The CPI Inflation Calculator by the U.S. Bureau of Labor Statistics yields values of $700 million and $350 million for these criteria as of 2022.
Customization
The sliders on the Advanced Graham Screener allow for customization of these Graham's criteria.
Size in Sales (100% ⇒ 500 Million)
A value of 100% on the Size in Sales filter implies a Sales value of 500 Million. The filter moves in steps of 20% which corresponds to increments of 100 Million each.
Size in Assets (100% ⇒ 250 Million)
Similarly, a value of 100% on the Size in Assets filter implies a Total Assets value of 250 Million. This filter too moves in steps of 20%, which corresponds to increments of 50 Million each.
Setting the Size in Sales and Size in Assets filters to 140% on the Advanced Graham Screener will show stocks with Sales and Total Assets of 700 million and 350 million respectively, in the listed currency.
Filter Calculator
The below JavaScript calculator can be used to automate the Inflation / Currency to Filter calculation.
For example — as of 2022 — enter 700 and 1 for the U.S., or 700 and 0.83 for the U.K.
Inflation Since 1971 (%)
Conversion Rate from USD
Size Filter Value (%)
Watch Video
Benjamin Graham
A Value Investing masterclass by Graham and dean Courtney Brown, at Columbia Business School (circa 1955).
The topics covered include the Efficient Market Hypothesis (EMH), investing on Margin, Inflation and Dollar Cost Averaging (DCA).