8 High-Yield Utilities Stocks Undervalued by the Graham Number
Published May 13, 2011 on Seeking Alpha

Many investors buy utilities stocks as a value investment because of their high dividends and generally low volatility relative to the market. Here we present an interesting list of high-dividend utilities that are currently undervalued based on the Graham equation.Benjamin Graham, the man who developed the equation for the Graham number, was a former mentor of Warren Buffett and is the so-called “Godfather” of value investing.The Graham Number, or the maximum price an investor should pay for a stock, is derived using only two data points: current earnings per share and current book value per share.

The Graham Number = Fair Value of a Stock = Square Root of (22.5) x (TTM Earnings per Share) x (MRQ Book Value per Share).

The math of the Graham number is relatively straightforward. It is predicated on the belief that the price-to-earnings (P/EPS) ratio should be no more than 15, and the... Read more