In the book "Intelligent Investor", Graham recommends a minimum annual sales figure of 100 Million $ as one of the criteria.

How do we adjust this figure for Inflation and a country other than the USA - i.e. a particular minimum sales may indicate a good size in the USA, but the figure may be different for different countries. Does anyone have an idea as to how Graham reached this figure - so that similar figures can be reached for other countries.

From the book, Chapter - Stock Selection for the Defensive Investor

  1. Adequate Size of the Enterprise.
    All our minimum figures must be arbitrary and especially in the matter of size required. Our idea is to exclude small companies which may be subject to more than average vicissitudes especially in the industrial field. (There are often good possibilities in such enterprises but we do not consider them suited to the needs of the defensive investor.) Let us use round amounts: not less than $100 million of annual sales for an industrial company and, not less than $50 million of total assets for a public utility.

3 Answers 3


Smaller markets can actually be more volatile so it's not a good idea to lower Graham's criteria for them.

The only real adjustment possible is inflation adjustment. $100 million in 1973 United States works out to $500 million today based on the difference in CPI/Inflation from 1973.

This number will be different for other markets where the rate of inflation since 1973 has been different. So the real question to ask is - what is to $100 million in the United States in 1973 worth today in your market?

Source: http://www.serenitystocks.com/how-build-complete-benjamin-graham-portfolio


If you look at the value as a composite, as Graham seems to, then look at its constituent parts (which you can get off any financials sheet they file with the SEC):

  • Total annual sales
  • Total assets
  • Total debt
  • Profit margin
  • Each of those as percentages of the state/national GDP

For example, if you have a fictitious company with:

  • $1B sales
  • $2B assets
  • $250m debt
  • 25% profit margin
    • ie $250m annual gross profit

Compared to the US GDP (~$15T) you have approximately:

  • Sales
    • 1/150%
  • Assets
    • 1/75%
  • Debt
    • 1/600%
  • Gross Profit
    • 1/600%

Now, scale those numbers to a region with a GDP of, say, $500B (like Belgium), the resultant numbers would be:

  • $33m sales
  • $66m assets
  • $8m debt
  • $3m gross profit
  • 1
    Make sure to remember the fact that so many companies today are knowledge-intensive rather than capital-intensive, and that as a result of technology, a smaller company can be much more robust today than it could have been in the past.
    – JAGAnalyst
    May 20, 2013 at 17:39
  • So does anyone know what the GDP of the USA was when Graham arrived at the 100 million$ figure? Then we could figure out the 100 million$ as a percentage of the GDP.
    – user93353
    May 20, 2013 at 21:06
  • @user93353 - he died in 1976. The GDP of the US in 1975 was ~$2T in standard 2000 dollars. A $100M in sales company then was HUGE. That would've been like a $750M company today (more-or-less). (And that's presuming he was referencing 1975 dollars.)
    – warren
    May 20, 2013 at 23:24
  • I looked around for a country which has around 2T$ GDP currently. India seems to be one. However, it looks like 1/2 of all stocks listed in India's stock market seem to have > 100 Million $ sales. And a lot of them are considered small companies. So I was wondering if GDP is indeed the right figure to focus on.
    – user93353
    May 21, 2013 at 4:01
  • @user93353 - are they industrial? That was the specific secotr Mr Graham wrote about
    – warren
    May 21, 2013 at 15:24

Benjamin Grahams strategy was to invest in REALLY SAFE stocks. In his time lean businesses weren't as common as they are now and he found many companies with assets greater than the value of their shares.

Putting a number figure on it isn't really necessary but the concept is useful. Its the idea that bigger companies are less turbulent (Which is something to avoid for an investor).

Most companies in the top 500 or whatever will satisfy this.

  • 1
    I am sure there are stock markets where the total no of stocks listed isn't more than 500, so top 500 isn't a good criteria.
    – user93353
    May 21, 2013 at 3:05
  • If you are looking for big companies you wouldn't be looking on small stock exchanges
    – Darcys22
    May 21, 2013 at 7:50
  • 1
    I guess you haven't read the question - I am looking for a way to convert 100 million$ into a figure which can be used for any country. And 2 of India's stock exchanges rank #10 & #11 in the world in terms of market capitalization. And irrespective of that point, I am looking for a way to arrive at a threshold based on some parameter which will work for any market. In a smaller country a business which is big by that countries standard should be more stable than the others.
    – user93353
    May 21, 2013 at 9:55

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