Seven Ben Graham stocks

The enterprising investor screen was meant for people with stock market experience who were ready to conduct considerable research into the stocks highlighted by the screen. As such, the screen can be seen as a starting point rather than an end in itself. The focus on finding companies with undervalued assets as well as strong balance sheets and earnings records means the stocks we've unearthed are a very contrarian bunch - so much so that none are 'buys' based on the IC's analysis and three of the seven are rated as 'sells'. All are subject to very adverse sentiment and anyone buying into such situations is likely to want the kind of peace of mind that only extensive research can bring. But, as Mr Graham observed, the prices offered by "Mr Market" are often ludicrous if one takes a long-term view on a stock.

While the enterprising investor screen is in fact more relaxed than Mr Graham's defensive screen, it is nevertheless extremely stringent and only seven stocks out of the 1,509 screened have past all of its tests. Mining has appeared as a key theme in the screen's results reflecting recent price weakness in the sector. The screening criteria are:

■ Price to tangible book value of 1.2 times or less

■ A PE ratio in the bottom third of all stocks (Mr Graham's recommendation is the bottom 10 per cent but we’ve relaxed this to get a few more results).

■ Positive earnings in each of the past five financial years

■ EPS higher now than five years ago

■ A dividend

■ A current ratio (current assets compared with current liabilities) of 1.5 or more

■ Net debt of less than 110 per cent of current assets

■ A market capitalisation of over £100m

ENTERPRISING STOCK PICKS

Asian Citrus

Asian Citrus (ACHL) has never had an easy relationship with the City. For some time it has suffered from unsubstantiated rumours questioning the quality of its assets and the veracity of its reporting. But more recently the issues denting sentiment have been very real. The share price has fallen due to fruit production and pricing disappointments. The situation has been made worse by the fact that a vehicle majority owned by the company's chairman sold 50m shares earlier this month just days before disappointing winter crop news was released. While a bumper dividend yield, share buy-backs and a substantial cash pile are attractions, the company has plenty to prove before investors are likely to start chasing the apparent value on offer.

Last IC view: Hold, 35p, 21 Sep 2012

Eurasian Natural Resources

Shares in Kazakh miner Eurasian Natural Resources (ENRC) have been battered recently. Falling commodity prices have combined with rising costs and an uncertain outlook to scare off investors leaving the shares 64 per cent off the 52-week high set at the start of the year. The company’s half-year results made for grim reading and the interim dividend was slashed by 59 per cent (so the historic full-year figure used in our table is of limited relevance) while immediate capital expenditure plans have been reigned in and longer-term spending is under review. A substantial fall in earnings is also expected this year. But what our screen makes clear is that the shares represent an enticing contrarian play for anyone that wants to bet on a revival in the price of industrial metals.

Last IC view: Sell, 376p, 16 Aug 2012

Kazakhmys

Kazakh copper miner Kazakhmys (KAZ) is suffering similar woes to ENRC. Prices are falling while costs are rising and all this has been made worse by declining ore quality at Kazakhmys’s mines. To add to its problems, the company owns a 26 per cent stake in ENRC which has fallen steeply in value (see above). It also slashed its half-year dividend by two thirds meaning the high historic dividend yield quoted in our table is a thing of the past. But Kazakhmys is attempting to bolster its performance with increased production, and following a disappointing start to the year, third quarter production rose an encouraging 12 per cent. Increased capital expenditure needed for development projects is expected to push up net debt over coming years.

Last IC view: Sell, 680p, 23 Aug 2012

Millennium & Copthorne

There have recently been signs that hotel group Millennium & Copthorne (MLC) is suffering due to the slowdown in the global hotel market. Its hotels’ locations in hub cities as well as its position as an owner-operator means trading can be particularly cyclical. The company is also 55 per cent owned by its chairman Leng Beng Kwek and has a reputation for frequent changes of chief executive, which has been negative for sentiment in the past. That said, the balance sheet is very robust and the company has recently become debt free. The group has a good record of creating value from property development and trading too.

Last IC view: Hold, 488p, 2 Aug 2012

Petropavlovsk

Russian gold and iron ore miner Petropavlovsk (POG) has struggled to entice investors. In June, with the shares at 408p, the shares qualified as a bargain stock in a screen devised by another value doyen, David Dreman. But while gold production continues to ramp up nicely and production costs have been kept on an admirably tight rein, other issues have surfaced. First-half profits tumbled due to charges relating to depreciation and interest payments on the company’s fast-rising debt. Rising debt levels have been a concern for some time and net debt is now around $1.3bn. Our screen looks at year end debt levels so misses the recent surge as the company is now in the fourth quarter of its financial year. The issue of corporate governance standards in Russia has also been a long-standing a concern for investors and has weighed on sentiment.

Last IC view: Hold, 387p, 23 Aug 2012

Anglo American

South-Africa focused miner Anglo American (AAL) has been rocked by recent industrial disputes and social unrest in the region. On a purely economic basis wildcat strikes and wage demands have severe implications for costs and production, while on a wider political and social level the extent of the problems are hard to judge at the moment. Amidst this furore, Anglo's chief executive, Cynthia Carroll has resigned. Aside from the current troubles in South Africa, the company has been criticised for not diversifying fast enough away from the region with slower-than-expected progress in Brazil especially. But the company does own some excellent mines, which has been overlooked amid all the current trouble.

Last IC view: Sell, 1,935p, 8 Nov 2012

Anglo-Eastern Plantations

Anglo-Eastern Plantations (AEP) shares have been hit due to fall in the price of palm oil - the commodity it farms. The company has also suffered due to adverse currency movements and rising costs and increased production has not been able to offset these negative influences. While little can be done about the market for palm oil, the company does at least look in good financial shape with a decent amount of cash in the bank.

Last IC View: Hold, 731p, 31 Aug 2012