Ben Graham is known as the "father of value investing". He was also Warren Buffett's teacher and mentor. Graham's famous rule for picking value stocks was that a stock's price-to-earnings ratio multiplied by its price-to-book ratio should equal less than 22. It's not groundbreaking research, but this simple formula does make for a good stock screen. Here we look at five stocks Graham would have approved of. (Learn about the man who taught investing to the Oracle of Omaha. Read The Intelligent Investor: Benjamin Graham.)

IN PICTURES: The Baby Buffett Portfolio: His 6 Best Long-Term Picks

Five Consumer Discretionary Picks Under 22

Company Market Cap P/B P/E (TTM)
Jarden (NYSE:JAH) $2.66B 1.5 11.46
Dorel Industries (Nasdaq:DIIB) $846.01M 0.7 8.47
Life Time Fitness (NYSE:LTM) $936.72M 1.3 12.86
Central Garden & Pet (Nasdaq:CENT) $668.57M 1.3 10.46
Corus Entertainment (NYSE:CJR) $1.36B 1.6 10.70

Jarden Corp.
This company's completely changed my mind about the use of debt. In the past, I looked upon Jarden as overburdened by its debt, but I've come to realize that the acquisitions it made prior to 2008 allowed it to survive and thrive in this recession. Today, it has over 100 brands to offer consumers including 10 with annual sales greater than $125 million. This diversification helped it generate $435 million in free cash in the trailing twelve months, enough to buy European baby and home care company Mapa Spontex in December. The $500 million acquisition adds $800 million in sales along with $80 million in EBITDA. More importantly, it gets Jarden further into the global economy.

Dorel Industries
This is the first of my two Canadian picks. Go Canada! Anyway, Dorel operates in three segments: juvenile products, bikes, and office and home furnishings. Started in 1962 in Quebec, it rose to international prominence in 2004 when it bought Pacific Cycle, one of the world's largest bike manufacturers selling to the mass market. It's been on a roll ever since. With over $2.2 billion in annual revenue in 2009, it's looking to improve on that number in 2010.

Life Time Fitness
Who remembers Bally Fitness? If you don't it comes as no surprise: the health club business is notorious for incredible flameouts like Bally. Space costs money, which has prompted a trend toward smaller, simpler gyms. That's not Life Time. Its facilities are big - 113,000 square feet on average - and target 8,500 to 11,000 members per gym. That might seem crowded, but when you consider the size of the facility combined with the number of machines available for both cardiovascular and resistance workouts over a 24-hour period, it's actually pretty good. With 84 centers in 19 states, this company also has a lot of room for expansion. The tricky part is managing its cash flow. Currently, it's not generating positive free cash - it's not even close. However, management made a presentation in December that would indicate they understand that increasing member retention rates along with improving in-center revenues (as they were doing a couple of years ago) are two important ways to achieve positive free cash flow. Even if the company fails in its efforts, it owns 57 of its centers, 32 without mortgages or long-term financing. Once the economy improves, so will the value of those assets.

Central Pet & Garden
Pets and gardens are two areas baby boomers will continue supporting as the population ages. This should benefit Central Pet & Garden. 2009 was a good year despite sales declining 5% to $1.61 billion from $1.70 billion. That's because operating income improved by 19.6% to $125.99 million from $105.35 million (excluding impairment charges of $430 million in 2008), its second best operating profit in the past 10 years.

Corus Entertainment
My second Canadian pick is a player in the Canadian television and radio broadcasting industry. Originally spun off from Canadian cable giant Shaw Communications (NYSE:SJR) in 1999, it now owns 52 radio stations in Canada; specialty television channels like YTV, W Network and Country Music Television, and Nelvana Productions, a world leader in animated programming. In fiscal 2009, revenues were flat at C$788.7 million and net income was down 8.8% to C$118.36 million (excluding C$175.0 million impairment charge) from $129.84 million. However, both its fourth quarter of fiscal 2009 and its first quarter this year saw increases year over year in both revenues and net profits. This trend should continue into future years.

Bottom Line
All five of these Graham-inspired picks have done a good job of surviving the downturn. I expect an improvement in the economy will take these stocks even higher. Just how much higher is the million-dollar question. (Investors use these four measures to determine a stock's worth. Find out how you can too. Check out The 4 Basic Elements Of Stock Value.)

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