To give some additional context, here is the full paragraph as written in the 1972 version:
So I've bolded the specific section that was in question. It seems the consensus on that thread is that Graham finds a particular stock financially "conservative" if (common stock)/(total assets) > 0.5. The specific post I'm referring to is here:The quoted phrase in our caption was used earlier in the chapter
to describe the kind of common stocks to which defensive
investors should limit their purchases—provided also that they
had paid continuous dividends for a considerable number of years.
A criterion based on adjectives is always ambiguous. Where is the
dividing line for size, for prominence, and for conservatism of
financial structure? On the last point we can suggest a specific standard that, though arbitrary, is in line with accepted thinking. An
industrial company’s finances are not conservative unless the common stock (at book value) represents at least half of the total capitalization, including all bank debt.3 For a railroad or public utility
the figure should be at least 30%.
This confuses me, however, because as the total value of common stock increases over total assets, doesn't that make the stock more overvalued? I'm wondering why the poster put greater than (>) instead of less than (<) in that particular mathematical expression.magician wrote: ↑Sat Mar 03, 2012 10:25 pm Common stock represents at least half of total capitalization. Total capitalization is debt plus equity which is total assets. So he's not saying that a company is conservative if debt ÷ total assets < 1.0; he's saying that a company is conservative if common stock ÷ total assets > 0.5.
I'm also wondering from all of you if we can come to a consensus that this is accurate.
Furthermore, and perhaps most importantly, I'd really like it if I could find a particular scannable term (or set of terms) that could match this expression (something like P/E or P/B). This would essentially make scanning for individual stocks that fit this criteria a much less laborious task.
I also found this thread on stack https://money.stackexchange.com/questio ... t-investor which suggests that the proper parameter to use would be Debt to Equity, and you would be looking for a value of less than 1. Can anyone confirm this?