Systematic & Quantitative Valuation
The Intelligent Investor
Graham's central claim in one line: returns are made at the moment of purchase, by paying less than a business is worth. The margin of safety is a number, not a mood — and it can be computed.
The big picture
Graham draws one line through all of investing: an operation that promises safety of principal and an adequate return, based on analysis, is an investment — everything else is speculation. The book's core bet is that price and value are different quantities, that the gap between them can be estimated, and that buying only when the gap is wide enough (the margin of safety) is what protects capital when the estimate turns out wrong.
Why it matters now: the AI build-out has produced a market where narrative moves faster than cash flow. A discipline that forces every position through a value-versus-price test — before the story gets a vote — is more useful in 2026 than it was in 1949.
The 3 strategic pillars
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Margin of safety
Never pay full estimated value. Demand a discount large enough to absorb your own estimation error.
Estimate intrinsic value conservatively, then act only when price sits well below it — a fixed threshold (commonly a third) turns the principle into a rule the market's mood cannot renegotiate.
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Mr. Market
Quotes are offers from a manic-depressive counterparty, not verdicts on what a business is worth.
You are free to transact only when the quote is attractive. The swing of the quote is the opportunity; treating it as information is the error.
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Defensive vs. enterprising
The right strategy depends on the work you will actually put in, not on your appetite for returns.
The defensive path is mechanical: diversified, quality-screened, rebalanced. The enterprising path earns its extra return only through genuinely more analysis — not more risk.
What a Closelook reader does with it
The working use of Graham is a pre-trade gate: compute a conservative intrinsic value, compare it to the quote, and refuse the trade when the discount is too thin. The specific mistake this prevents is paying for a story at a price that already assumes the story works — the dominant failure mode in growth and AI names. Applied honestly, the test does not tell you what to buy; it tells you when the price alone has already decided against you.
The bridge to the Closelooknet approach
Closelooknet's index work starts one layer earlier than Graham — function first, then price: Rubin selects what builds the AI factory before asking what it costs. Graham supplies the discipline for the second step. The Valuation Gap framework is the house's own restatement of his central spread, and the Reference Portfolio applies his defensive rules — diversification, quality gates, scheduled rebalancing — to a modern tech book. Where Graham reads earnings stability from ten years of history, the Company Scoring System computes the same quality dimensions nightly across the 334-name universe. The two approaches meet in the middle: our screens find the function, his margin decides the entry.
Action-Kit — from theory to practice
Tooling & data
| What you need | Where to get it | Cost |
|---|---|---|
| Company fundamentals (EPS, book value, current ratio, dividend record) Inputs for the intrinsic-value and defensive screens | stockanalysis.com or the issuer's investor-relations filings Ten years of income-statement and balance-sheet history is enough for every test in the book. | Free |
| Corporate bond yield (AAA) The discount anchor in the revised Graham formula | FRED series AAA (Moody's Seasoned Aaa Corporate Bond Yield) | Free |
| Screener with fundamental filters Run the seven defensive-investor criteria across a market | Finviz (US) or the TradingView stock screener (global) Free tiers cover P/E, P/B, current ratio and dividend filters; export needs the paid tier. | Freemium |
The formulas
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Graham intrinsic value (revised)
V = EPS × (8.5 + 2g) × 4.4 / Y- EPS — trailing twelve-month earnings per share
- g — expected annual earnings growth over 7–10 years, in %
- Y — current AAA corporate bond yield, in %
8.5 is the no-growth P/E Graham considered fair; 4.4 was the AAA yield when he calibrated it. The Y divisor re-anchors the result to today's rates.
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Graham Number
GN = √(22.5 × EPS × BVPS)- EPS — trailing earnings per share
- BVPS — book value per share
The ceiling price at which a defensive purchase still satisfies both P/E ≤ 15 and P/B ≤ 1.5 (their product ≤ 22.5).
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Margin of safety
MoS = 1 − Price / V- Price — current quote
- V — intrinsic value estimate
Graham's practice implies acting only above roughly one-third; the pack lets you set your own threshold.
Applied Pack · free members
Graham Applied Pack
The book's three formulas as a working Excel calculator plus a Python screener over your own fundamentals list — set your margin threshold and let the rule, not the mood, decide.
- Graham_Calculator.xlsx — intrinsic value, Graham Number, margin of safety and the seven-point defensive checklist, with live formulas and worked growth-vs-utility example rows
- graham_screener.py — self-contained screener: feed it a fundamentals CSV (sample included), get every ticker ranked by margin of safety with pass/fail on the defensive criteria
- fundamentals_sample.csv — example input file showing the expected columns
- README.txt — column reference, sourcing tips and the educational-use disclaimer
Pack security
Macro-free Excel · plain-text Python you can read before you run it · no installers, no network access — the code works only on files you provide. Served only from closelook.net; we never distribute through download portals or email attachments. How to verify in 30 seconds →
SHA-256 99bbaa6eed50ad9eb3a5b8683bcd5c96e723454e984f52b9e43ffd998cbe7f2e
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Educational templates — a research diary companion, not investment advice.
Go deeper
The Complex: you read Graham — now what? →
The disciples, the modernizers, the critics — and where the line runs today.
Closelook publishes a market diary, not investment advice. This condensed read restates the book's ideas in our own words for education — for the author's full argument, go to the source.