Skills / Finance-investing

Intelligent Investor Framework

The investor's chief problem—and even his worst enemy—is likely to be himself.

The Intelligent Investor is Benjamin Graham's rigorous, rule-based framework for value investing, first published in 1949 and refined through decades of market analysis and teaching at Columbia Business School. It classifies every investor as either Defensive or Enterprising and provides each type with a precise, quantitative stock-selection checklist. The framework's central principle—the Margin of Safety—requires that you only buy when market price sits at least 33% below conservatively calculated intrinsic value, eliminating speculation and enforcing discipline regardless of market mood.

By Benjamin Graham  ·  Free

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Specimen 01 · Live diagnosisIntelligent Investor Framework

Input

“Probably somewhere in the middle—I can spend a few hours a month, but I'm not going to be reading 10-Ks every week. I have a specific stock I want to…”

Diagnosis

Welcome.

Full transcript ↓

Calibrated referenceagent-skills.ai

The gap

Score every stock against Graham's 7 criteria, compute intrinsic value, and only buy with a margin of safety

Graham's framework begins by classifying the investor: the Defensive (passive) investor prioritizes safety and simplicity, applying a 7-criterion checklist covering adequate company size, strong financial condition (current ratio ≥ 2:1), 10 consecutive years of positive earnings, 20 consecutive years of dividends, at least one-third EPS growth over 10 years, P/E ≤ 15×, and price-to-book ≤ 1.5× (combined in the Graham Number: √(22.5 × EPS × BVPS)). The Enterprising (active) investor overlays additional strategies: net-net (NCAV) stocks trading below two-thirds of net current asset value, bargain issues with P/E below 10, and special situations such as arbitrage or liquidations. Both paths are anchored by the Margin of Safety—buy only when market price is at least 33% below intrinsic value. The Mr. Market allegory reframes price volatility not as risk but as opportunity: the market is a moody business partner offering daily buy/sell prices you are free to ignore or exploit. Asset allocation defaults to 50% stocks / 50% bonds, shifting toward equities only when valuations are demonstrably cheap.

The problem

Most individual investors have no systematic way to distinguish an investment from a speculation. They pay up for popular stocks at peak valuations, panic-sell during corrections when they should be buying, and mistake Mr. Market's daily mood swings for meaningful signals. Without Graham's quantitative criteria and margin-of-safety discipline, even well-intentioned investors become their own worst enemy—as Graham warned explicitly.

The solution

Apply Graham's exact numerical thresholds to any publicly traded stock, compute its intrinsic value with the Graham Number formula, and determine whether the current price offers a genuine margin of safety—so every buy decision is an investment, not a guess.

You bring

A specific stock ticker or company you are considering buying
Basic financial data: EPS (earnings per share), book value per share, current ratio, 10-year earnings history
Your investing style preferences (passive/low-maintenance vs. active/research-intensive)
Current market context: the price you are seeing and any news driving it

You get

A scored 7-criterion Defensive Investor checklist with pass/fail for each criterion and an overall buy/avoid verdict
A computed Graham Number (intrinsic value ceiling) and a margin-of-safety percentage relative to current price
Investor type classification (Defensive or Enterprising) with a tailored strategy road map
A Mr. Market reframe that converts market volatility or recent news into a clear action signal—buy, hold, or ignore

In action

Watch the methodology work.

Three specimens from a single real session: the same situation, unaided and calibrated, the full transcript, and the skill answering live in the channel where the work happens.

Fig.01  —  The same situation, two ways

Specimens A · B

Specimen AVague

Unaided

“You have been watching Johnson & Johnson for months, attracted by its dividend history and brand stability. The stock has pulled back 8% on a litigation headline and you feel the urge to buy. You have no systematic way to evaluate whether the current price represents genuine value or whether you are simply reacting to a short-term price drop on an overvalued stock.”

×Vague — nothing concrete to act on.

Specimen BCalibrated

With Intelligent Investor Framework

“You run J&J through the 7-criterion Defensive Investor Scorecard, compute the Graham Number at $75.72, and confirm that the current price of ~$155 offers a negative margin of safety—you would be paying more than twice Graham's intrinsic value ceiling. You add J&J to a watchlist with a target entry range of $50–75, ignore Mr. Market's day-to-day offers, and redirect your attention to sectors currently trading at distressed valuations where the checklist might yield a passing candidate.”

◦Specific, grounded, and ends with one clear next step.

Fig.02  —  A real session, unedited

In-app · assistant

Intelligent Investor FrameworkClaude

Intelligent Investor Framework

Welcome. Before we analyze any stock, we need to establish which investor path is right for you—because Graham's framework prescribes very different criteria for Defensive and Enterprising investors, and mixing them is a common mistake.

Here's the core question: Are you willing to spend meaningful time—say, 10–20 hours per year minimum—researching individual companies, reading balance sheets, and actively seeking out undervalued situations? Or would you rather follow a strict, conservative checklist that requires less ongoing work but accepts a smaller opportunity set?

Your honest answer determines whether we apply the 7-criterion Defensive Investor checklist, or whether we add the Enterprising investor's net-net screen and bargain-issue criteria on top.

Probably somewhere in the middle—I can spend a few hours a month, but I'm not going to be reading 10-Ks every week. I have a specific stock I want to analyze: Johnson & Johnson.

That profile puts you firmly in Defensive Investor territory, which is exactly where Graham would place most individual investors. He was blunt about this: trying to be 'semi-enterprising' without the full commitment typically produces the worst of both worlds—the effort without the discipline.

Let's run J&J through the 7-criterion Defensive Investor Scorecard. I'll need a few data points to complete it. Can you provide or confirm:

Annual revenue (recent fiscal year)2. Current ratio (current assets ÷ current liabilities)3. Has JNJ been profitable every year for the past 10 years? (Yes/No/Unsure)4. Dividend history — has JNJ paid dividends every year for at least 20 consecutive years?5. EPS today vs. EPS 10 years ago (for earnings growth check)6. Current P/E ratio and current price-to-book ratio

If you don't have all of these handy, tell me what you know and I'll flag which criteria we can estimate and which need verification.

Revenue is about $88 billion, current ratio around 1.1, profitable every year for decades, dividends paid for 60+ years, EPS has grown from roughly $5.10 ten years ago to about $9.80 now, P/E is around 16, and price-to-book is about 6.5.

Here is J&J's Defensive Investor Scorecard:

| Criterion | Threshold | J&J Actual | Result ||---|---|---|---|| Adequate size (revenue) | ≥ $100M | ~$88B | ✅ PASS || Current ratio | ≥ 2.0 | ~1.1 | ❌ FAIL || Long-term debt ≤ net current assets | See below | Needs check | ⚠️ VERIFY || Earnings stability (10 yr) | Positive every year | Yes, decades | ✅ PASS || Dividend record | Uninterrupted 20+ yrs | 60+ years | ✅ PASS || Earnings growth (10 yr EPS) | ≥ +33% | +92% ($5.10→$9.80) | ✅ PASS || P/E ratio | ≤ 15× | ~16× | ❌ FAIL || Price-to-book | ≤ 1.5× | ~6.5× | ❌ FAIL |

Verdict: DOES NOT PASS the Defensive Investor screen. J&J fails three criteria—current ratio, P/E, and price-to-book—and has one unresolved item.

This is actually a very common outcome for high-quality large-caps. Graham's criteria are intentionally demanding. J&J is a genuinely excellent business—but 'excellent business' and 'excellent investment at this price' are different questions. Shall we compute the Graham Number to see how far the current price is from Graham's intrinsic value ceiling?

Yes, let's do the Graham Number. EPS is $9.80 and book value per share is around $26.

Graham Number Calculation for Johnson & Johnson:

Formula: √(22.5 × EPS × BVPS)√(22.5 × $9.80 × $26.00)√(22.5 × 254.80)√(5,733)Graham Number = ~$75.72

If J&J is currently trading around $155–160, the Graham Number tells us:

- Current price is ~2.1× the Graham Number- To reach Graham's maximum fair value price, shares would need to fall ~52%- To reach the Margin of Safety entry price (≥33% below Graham Number), you would need to buy at ~$50.73 or below- Current margin of safety: negative — you would be paying a significant speculative premium over Graham's intrinsic value ceiling

This doesn't mean J&J will fall, or that it's a bad company. Graham would say: Mr. Market is currently offering J&J at a price that reflects considerable optimism about future growth. That optimism may prove correct. But the Defensive Investor's discipline is to decline that offer—because the margin of safety is absent, and without it, you are speculating on future earnings rather than investing in current value.

That's eye-opening. So basically, even a Dividend King like JNJ doesn't pass the Graham screen at today's prices?

Exactly—and this is one of Graham's most important lessons. Quality and price are separate variables. J&J passes 4 of 7 Defensive Investor criteria beautifully: it's enormous, profitable every year, a dividend aristocrat with 60+ years of consecutive payments, and its earnings have nearly doubled in a decade. That is a genuinely excellent business.

But Graham's framework separates the quality of the business from the quality of the investment. At 6.5× book and 16× earnings, the current price already assumes continued excellence. There is no cushion for disappointment—no margin of safety.

Graham's Mr. Market parable applies here: Mr. Market is today offering you J&J at an optimistic price. That offer is worth declining. If Mr. Market later becomes depressed—if J&J faces a litigation headline, an earnings miss, or a broad market sell-off pushes the stock toward $70–80—that's when the Defensive Investor checks the scorecard again.

For now, I'd recommend putting J&J on a watchlist with a target entry range around $50–75 (margin-of-safety territory). In the meantime, would you like to run any other tickers through the screener, or explore which market sectors currently contain more Defensive Investor candidates?

Reply to Intelligent Investor Framework…

What the skill is doing

01Investor Type Classifier

02Defensive Investor 7-Criterion Screener

03Graham Number Calculator

Fig.03  —  The same skill, in the channel you already use

WhatsApp · live

9:41

IIIntelligent Investor Frameworktyping…

Messages are end-to-end encrypted. No one outside of this chat can read them.

Today

Probably somewhere in the middle—I can spend a few hours a month, but I'm not going to be reading 10-Ks every week. I have a specific stock I want to…9:14✓✓

Or would you rather follow a strict, conservative checklist that requires less ongoing work but accepts a smaller opportunity set?9:14

Message

The same skill, where the work happens.

No new app to learn. The methodology runs over the WhatsApp Business API, so the answer lands as a reply in the thread you’re already in — same rigour, zero context-switch.

◦Reads the situation, names the pattern, returns one concrete next move.

◦Delivered in seconds, inside a conversation that already exists.

Specimen · WhatsApp Business API · live

Capabilities

What it does, specifically.

Each capability is a distinct move drawn straight from the source methodology — not a generic assistant guessing.

CapabilityC-01

Investor Type Classifier

A structured questionnaire that determines whether you are best suited to the Defensive or Enterprising investor path. The result unlocks a tailored strategy: Defensive investors receive the 7-criterion checklist and dollar-cost averaging guidance; Enterprising investors add NCAV screens, bargain-issue filters, and special-situation criteria.

◦ MethodBased on Graham's foundational distinction in Chapters 1 and 5 of The Intelligent Investor, where he argues that investor type is determined by willingness to devote 'time, study, and ability' to security analysis—not by risk tolerance alone.

CapabilityC-02

Defensive Investor 7-Criterion Screener

Walks through all seven of Graham's Defensive Investor criteria for a given company, scoring each pass or fail with the exact threshold, the company's actual figure, and an explanation of why the criterion exists. Produces a final verdict with a plain-language summary of the company's investment merit.

◦ MethodDirectly implements Graham's Chapter 14 checklist: adequate size (revenue ≥ $100M), current ratio ≥ 2:1, long-term debt ≤ net current assets, 10 years of positive earnings, 20 years of uninterrupted dividends, ≥ 1/3 EPS growth over 10 years, P/E ≤ 15×, and P/B ≤ 1.5×.

CapabilityC-03

Graham Number Calculator

Computes the Graham Number—the maximum price a Defensive investor should pay for a stock—from user-supplied EPS and book value per share inputs. Compares the result to the current market price and outputs a margin-of-safety percentage, flagging whether the stock offers the required ≥ 33% discount.

◦ MethodImplements Graham's combined valuation formula: Graham Number = √(22.5 × EPS × BVPS), derived from the dual constraint that P/E ≤ 15 and P/B ≤ 1.5 (since 15 × 1.5 = 22.5). A margin of safety is present only when market price ≤ Graham Number × 0.67.

CapabilityC-04

Margin of Safety Analyzer

Given any intrinsic value estimate (whether the Graham Number, a DCF, or a conservative earnings-power figure), calculates the margin of safety at the current price and explains what level of price decline would eliminate it. Helps users understand how much is 'baked in' and how vulnerable their position is to estimation error.

◦ MethodRooted in Graham's Chapter 20, the book's final and most important chapter, where he states that the margin of safety is the 'secret of sound investment'—a buffer against errors in analysis, adverse events, or prolonged market irrationality.

CapabilityC-05

Mr. Market Situation Reframer

Takes a current market event—a crash, a sector sell-off, a company earnings miss, or a rally—and reframes it through Graham's Mr. Market allegory. Determines whether the event represents a buying opportunity (Mr. Market is offering a panic price), a selling opportunity (Mr. Market is offering an inflated price), or a non-event to ignore.

◦ MethodBased on Graham's Mr. Market parable from Chapter 8: the stock market is a hypothetical business partner who offers you a new price every day. Your job is never to let his mood influence your judgment of business value, but to exploit his irrationality when it serves you.

CapabilityC-06

NCAV Net-Net Evaluator

Guides Enterprising investors through the net current asset value (NCAV) calculation for a given company and determines whether the stock qualifies as a 'net-net'—trading below two-thirds of NCAV. Explains the logic of this deep-value approach and notes its scarcity in modern developed markets.

◦ MethodImplements Graham's original bargain-hunting method for Enterprising investors: NCAV = current assets − total liabilities. A stock is a net-net candidate when market cap < (2/3) × NCAV, as described in Security Analysis and referenced throughout The Intelligent Investor.

Tested

Graded before it shipped.

Every skill is scored against independent scenarios for methodology fidelity before it goes live — not vibes, a rubric.

What it produces

OutputD-01

Defensive Investor Scorecard

A pass/fail table showing each of the 7 Graham criteria, the company's actual figure for each, the required threshold, and a summary verdict. Exportable as a structured summary you can reference before executing any buy order.

OutputD-02

Graham Number Valuation Sheet

A single-page calculation showing EPS, BVPS, the computed Graham Number, the current market price, and the resulting margin-of-safety percentage—formatted so the buy/avoid decision is immediately clear.

OutputD-03

Investor Type Profile

A brief profile classifying you as Defensive or Enterprising with a tailored action plan: asset allocation target, which screening criteria apply to you, and a recommended starting checklist for your first stock analysis.

OutputD-04

Mr. Market Situation Brief

A one-page reframe of a current market event—translating price movements into Graham-framework language: what it means for intrinsic value, whether margin of safety has opened or closed, and what action (if any) Graham's methodology prescribes.

The source

Grounded in the original work.

Every answer traces back to a real source and the practitioner who wrote it — not a secondhand summary. Here is the source of record.

Source authorA-01

Benjamin Graham

Benjamin Graham (1894–1976) was a British-born American economist, investor, and professor who taught security analysis at Columbia Business School for nearly three decades, where Warren Buffett was among his students. He managed the Graham-Newman Corporation from 1936 to 1956, compounding returns well above market averages. Widely regarded as the father of value investing, he authored the foundational texts Security Analysis (1934, with David Dodd) and The Intelligent Investor (1949), the latter described by Warren Buffett as 'by far the best book about investing ever written.'

Status · Inspired by Benjamin Graham’s work — not yet claimed. Are you Benjamin Graham?

Primary sourceS-01

The Intelligent Investor (Revised Edition, 1973)

by Benjamin Graham

Father of value investing; Columbia Business School professor; mentor to Warren Buffett; co-author of Security Analysis (1934); The Intelligent Investor named the definitive investing text by Buffett.

Read the original ↗

Citationamazon.com

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At launchI want to analyze a specific stock using Graham's framework. Can we run it through the full Defensive Investor checklist and compute the Graham Number to see if there's a margin of safety at the current price?