How does Value Investing for defensive investors looks like in 2026?

Based on Benjamin Graham's a defensive investor must limit to companies that meet these 7 rigorous criteria: * **Adequate Size:** Large, prominent companies (avoid small companies, which are more vulnerable). * **Strong Financial Condition:** For industrial companies, current assets should be at least 1.5 to 2 times current liabilities. Long-term debt should not exceed net working capital. * **Earnings Stability:** The company must have had continuous positive earnings for the past 10 years. * **Dividend Record:** It must have paid uninterrupted dividends for at least the past 20 years. * **Earnings Growth:** A minimum increase of one-third in earnings per share over the past 10 years. * **Moderate Price-to-Earnings (P/E) Ratio:** The stock price should be no more than 15 times the average earnings of the last 3 years. * **Moderate Price-to-Book (P/B) Ratio:** The price should not exceed 1.5 times the book value of the company. Do you still apply these 7 criteria in 2026? Or has anything change?

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u/Kyaw_Gyee 1 1 day ago

Too complex. Just buy SCHD. If you dare to take risk, VWRA. If you feel lucky, buy RDDT or RKLB.
u/Artic_funky OP 1 1 day ago

VYM looks like SCHD too
u/Funny-Wishbone7381 1 1 day ago

Yes, it's a good time for value investors to look at large caps with good valuations. It's nice not having to have to dig around in the depths of obscure stocks at the moment.
u/NicheMath 1 1 day ago

I don’t know if you are being sarcastic or if value investing has shifted so much from what it’s supposed to be.
u/RodneyJ469 1 1 day ago

What do you mean by that?
u/NicheMath 1 1 day ago

Value investing is all about finding small companies that are mis priced and not accessible to the big funds.
u/Ehh_littlecomment 1 1 day ago

I really feel like you’d be better served staying away from dogma and sticking to the core principles. You invest in whatever company is mispriced in your view. You shouldn’t stay away from something like SAP or Capcom just because it isn’t small.
u/NicheMath 1 1 day ago

Agreed 100%. But on the other hand 90% of the companies discussed on this sub are $100B+ at least.
u/RodneyJ469 1 1 day ago

Thanks for the explanation. I managed a value fund (small/mid cap) for several years, pretty successfully. But I’m sure we’d have done much better with your help.
u/NicheMath 1 1 day ago

Hey man the sarcasm is not lost on me. I thought it was a genuine question, and I gave you a genuine answer. I don’t have a fund, and never had one.
u/RodneyJ469 1 1 day ago

If I came across as sarcastic it wasn’t intentional, at least not entirely. But while your point about finding opportunities primarily in smaller companies has a lot to be said for it, it’s correct to say that value investors must necessarily confine themselves to that space. And, for what it’s worth, I think our fund might well have benefited from having you on the team. Talented analysts are always hard to come by — they were 20:years ago and they still are. And even a few minutes scanning your posts is enough to make me suspect that you’re pretty bright.
u/NicheMath 1 1 day ago

All good man. Just a bit of fun. Check my latest post, i think I found a gem.
u/sum_dude44 1 1 day ago

has nothing to do w/ size & more about valuation You can have value blue chips, macros, mids & micro companies
u/NicheMath 1 1 day ago

okay
u/raytoei 1 1 day ago

All except the last two. I do my own valuation , double-check it against one or two sources and try not to overpay.
u/librariancap 1 1 day ago

These lists are nearly always mad. And it's easy to see this, given what companies this one excludes.
**Earnings Stability:** The company must have had continuous positive earnings for the past 10 years.
No General Dynamics (earnings down in 2020), American Express (earnings down in 2020, 2022)
**Dividend Record:** It must have paid uninterrupted dividends for at least the past 20 years
No Berkshire Hathaway (no dividend)
**Moderate Price-to-Book (P/B) Ratio:** The price should not exceed 1.5 times the book value of the company.
No Philip Morris (or Altria) (negative book value)
**Moderate Price-to-Earnings (P/E) Ratio:** The stock price should be no more than 15 times the average earnings of the last 3 years.
That's virtually everything in the market today.
u/Artic_funky OP 1 1 day ago

You're right, what would be the updated version of this list for you?
u/librariancap 1 1 day ago

Do you really think a list can generate alpha in the age of AI? Was it working even in the preceding age of Internet and computer spreadsheets?
u/shaggy98 1 1 day ago

Price to book is uselles if it had large buyback in the last years. And a p/e of 30 is not that bad if in last years it had only p/e of over 50, and in the lowest moments like 2020 or 2022 it was bellow 30.
u/No_Presentation9490 1 1 day ago

Investing in value/defensives is something to be done during a liquidity event where correlations are 1 It's not something to chase when it's already a crowded trade, even if the metrics look good
u/ayyitsLibra 1 1 day ago

??? This is not Ben Graham??
u/investingtruth 1 1 day ago

Most of Graham's criteria still hold up conceptually but the strict 15x PE and 1.5x price to book thresholds are largely obsolete. A more practical modern approach would keep the spirit of his rules but apply relative rather than absolute valuation limits. Start by comparing a company's multiple to its own history and sector peers instead of any fixed number.
u/Ehh_littlecomment 1 1 day ago

It’s actually completely obsolete and will only buy you dogwater companies that don’t go up. You buy where there is value on the table. Doesn’t matter if it’s 15 PE or 1500.