IBD Long-Term Leaders Cadence Design Systems (CDNS) and Monolithic Power Systems (MPWR) join Google parent Alphabet (GOOGL) on this screen of Warren Buffett stocks, based on the investing strategy of the Berkshire Hathaway CEO.
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Highlighting Warren Buffett Stocks
Including GOOGL stock, CDNS and MPWR, 39 companies make this stock screen.
Building materials manufacturer Atkore (ATKR) tops the list with an impressive sustainable earnings growth rate of 90%. (The rate is computed by multiplying the company’s ROE by the earnings retention ratio, which is the percentage of earnings not paid out as dividends.)
Including Atkore, Builders FirstSource (BLDR) and Steel Dynamics (STLD), five companies on this screen had sustainable growth rates above 50%. Pool (POOL) and solar energy play Daqo New Energy (DQ) also earned that distinction.
Nucor (NUE) just misses that distinction with a 44% sustainable growth rate. Reliance Steel (RS) (25%) and Brazilian steel producer Gerdau (GGB) (17%) also make this screen of Warren Buffett stocks.
Retail stocks Lululemon Athletica (LULU), Boot Barn (BOOT) and Buckle (BKE) also make the cut.
Led by D.R. Horton (DHI), homebuilders have fabricated a strong presence on this screen. PulteGroup (PHM), Lennar (LEN), Meritage Homes (MTH), and Tri Pointe Homes (TPH) are on the list too.
GOOGL Joins Tech Names Among Warren Buffett Stocks
Since the Oracle of Omaha has never written a book detailing his investment strategy, there’s no definitive buying checklist. But parts of Buffett’s stock-picking strategy can be gleaned from the annual reports of Berkshire Hathaway (BRKB).
The list below highlights Warren Buffett stocks like Alphabet, Cadence Design Systems and Monolithic Power Systems in sync with Buffett’s focus on management quality and long-term growth.
Reflecting improvement in the tech sector following the trouncing it took in last year’s bear market, the screen also picks up a number of other tech names. The latest list of Warren Buffett stocks also includes STMicroelectronics (STM), PTC (PTC), Epam Systems (EPAM), and Chinese online gaming platform NetEase (NTES).
Created in MarketSmith, the screen below emphasizes metrics to use when looking for companies with long-term past, and potential future, growth. To make the list, each stock must meet a wide range of criteria, including:
In the top 25% of all stocks in terms of five-year annual EPS growth rate.
15% or greater sustainable earnings growth.
12% or better five-year average return on equity.
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Warren Buffett Stocks: MarketSmith Screen
Company
Symbol
Sustainable Growth %
ROE 5-Yr Avg
Comp Rating
EPS Rating
RS Rating
SMR Rating
Atkore
ATKR
90
72.1
96
92
95
A
Builders FirstSource
BLDR
63
45.1
96
97
94
A
Daqo New Energy
DQ
62
22.6
91
99
81
A
Steel Dynamics
STLD
54
38.4
93
81
95
B
Pool
POOL
50
60.4
77
86
57
B
Nucor
NUE
44
31.9
90
67
89
B
Cadence Design Systems
CDNS
43
36.1
98
97
94
A
Clearfield
CLFD
39
22.6
50
99
9
A
Boot Barn
BOOT
38
26.4
83
76
79
B
Lululemon Athletica
LULU
38
36.9
88
97
43
A
Winnebago Industries
WGO
37
26.6
88
79
81
B
Old Dominion Freight Line
ODFL
34
28.3
97
97
91
A
STMicroelectronics
STM
34
17.4
98
98
95
A
Commercial Metals
CMC
33
23.7
96
99
85
A
D.R. Horton
DHI
32
25.8
95
92
94
B
Monolithic Power Systems
MPWR
30
29.3
99
99
92
A
PulteGroup
PHM
30
21.4
98
99
94
A
Evercore
EVR
28
45.7
81
57
88
C
Meritage Homes
MTH
28
21
99
97
94
A
UFP Packaging
UFPI
28
22.4
77
93
65
B
Saia
SAIA
26
18.7
97
91
94
A
PTC
PTC
25
22.6
89
92
81
A
Regeneron Pharmaceutical
REGN
25
35
88
66
89
B
Reliance Steel & Aluminm
RS
25
19.6
94
81
95
B
Super Micro Computer
SMCI
25
23.4
99
99
97
A
Epam Systems
EPAM
24
20.5
62
95
32
A
Alphabet
GOOGL
24
22
52
73
29
B
West Pharmaceutical Services
WST
24
22.5
91
83
89
B
Perion Networks
PERI
23
15.7
97
98
98
A
Shutterstock
SSTK
23
25.5
94
97
93
A
Westlake
WLK
23
17.4
66
50
69
B
Tri Pointe Homes
TPH
22
16.7
98
97
94
B
Lennar
LEN
21
17.3
98
97
93
A
NetEase
NTES
21
21.7
82
89
83
B
Triton International
TRTN
18
19.4
89
90
65
A
Gerdau
GGB
17
15.7
90
80
76
B
Quanta Services
PWR
17
14.5
92
94
90
B
Buckle
BKE
16
53.3
91
83
82
A
Danaher
DHR
16
14.7
52
89
32
B
Screen created using MarketSmith Data as of March 15
Warren Buffett Stocks In Demand By Top Funds
The latest list of new buys by the best mutual funds features several names also highlighted in this screen of Warren Buffett stocks.
On the tech side, Cadence Design Systems, Monolithic Power Systems and STMicroelectronics make both lists.
From the building sector, Atkore, Builders FirstSource, Meritage Homes, and PulteGroup all make the cut.
IBD Stock Ratings Vs. The Oracle Of Omaha
IBD uses different criteria than those used for this list of Warren Buffett stocks. MPWR and SMCI, for example, score the highest-possible 99 Composite Rating. The rating means the stock is outpacing 99% of all companies in terms of key stock-picking traits. Cadence Design Systems earn a score of 98 in IBD Stock Checkup.
After all the carnage in the tech sector last year, GOOGL stock has sunk to a 52 Composite Rating.
Including Alphabet, many companies on the list do meet typical Warren Buffett criteria but do not meet some benchmarks that CAN SLIM investors seek in the other stock ratings that gauge a company’s fundamental, as well as technical, strength.
Ranging from 1 (worst) to 99 (best), the Composite Rating reveals how strongly a company is showing the seven telltale traits of winning stocks. For example, a rating of 95 means the company is outperforming 95% of all other stocks in terms of the most important fundamental and technical stock-picking criteria.
The EPS Rating tracks a company’s annual and quarterly earnings growth, then measures how its numbers stack up against those of all other stocks. So just like the Composite Rating, a score of 95 means the company’s EPS growth is in the top 5% of all stocks.
Similarly, identifying stocks with strong fundamentals, the SMR Rating tracks sales growth, profit margins and return on equity as a whole. An A rating means the company is in the top 20% of all stocks in terms of those key fundamental performance metrics. Since it ties in with the legendary investor’s focus on a company’s fundamentals, this can be a particularly useful rating for investors looking for potential Warren Buffett stocks.
Follow Matthew Galgani on Twitter at @IBD_MGalgani.
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