While the recent bear market has mauled tech stocks, Alphabet (GOOGL) and fellow IBD Long-Term Leaders Monolithic Power Systems (MPWR) and Cadence Design Systems (CDNS) maintain their spots on this screen of Warren Buffett stocks, which is based on the investing strategy of the Berkshire Hathaway CEO.
Steel Dynamics (STLD) tops the list with a sustainable earnings growth rate of 59%. (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.)
Fellow steel stock Nucor (NUE) has also forged a position on the list.
Solar energy play Daqo New Energy (DQ) is also on the list.
Since the Oracle of Omaha has never written a book detailing his investment strategy, there’s no definitive buying checklist. But parts of his stock-picking strategy can be gleaned from the annual reports of Berkshire Hathaway (BRKB).
Highlighting Warren Buffett Stocks
The list below highlights Warren Buffett stocks like Alphabet, Cadence Design Systems and Steel Dynamics that are in sync with his focus on management quality and long-term growth.
Berkshire also added to top holding Apple (AAPL) in Q1. The conglomerate also grew its stake in Chevron (CVX) and placed a big bet on Occidental Petroleum (OXY), perhaps with expectations for oil prices to stay elevated.
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:
- Top 25% of all stocks in terms of five-year annual EPS growth rate.
- 15% or greater sustainable earnings growth.
- 12% or better 5-year average return on equity.
Warren Buffett Stocks: MarketSmith Screen
Screen created using MarketSmith | Data as of Aug. 16, 2022
|Company||Symbol||Sustainable Growth %||ROE 5-Yr Avg||Comp Rating||EPS Rating||RS Rating||SMR Rating|
|Steel Dynamics Inc||STLD||59||30.3||97||98||92||A|
|Williams Sonoma Inc||WSM||55||45.6||87||96||84||A|
|Daqo New Energy Corp Ads||DQ||52||17||99||99||98||A|
|Expeditors Intl Wash Inc||EXPD||40||31.5||81||95||38||A|
|Kulicke & Soffa Ind Inc||KLIC||39||22.8||65||91||26||A|
|Boot Barn Holdings Inc||BOOT||38||21.7||61||92||15||A|
|Trex Company Inc||TREX||38||34.2||56||98||11||A|
|Cadence Design Systems||CDNS||35||33.5||99||97||95||A|
|Winnebago Industries Inc||WGO||30||23||95||97||81||A|
|D R Horton Inc||DHI||29||22.9||80||99||52||A|
|Alphabet Inc Cl A||GOOGL||29||20.3||76||89||45||A|
|West Pharmaceutical Svcs||WST||29||20.6||74||89||41||A|
|Five Below Inc||FIVE||28||20.7||56||76||18||B|
|Laboratory Corp Of Amer||LH||27||21.7||65||71||52||C|
|Old Dominion Fght Line||ODFL||27||22.8||97||98||84||A|
|Logitech Intl Sa||LOGI||26||32.8||23||64||17||C|
|Green Brick Partners Inc||GRBK||25||16.6||96||99||95||A|
|Meridian Bioscience Inc||VIVO||25||20||90||82||97||B|
|Epam Systems Inc||EPAM||24||20||92||97||83||A|
|Monolithic Power Systems||MPWR||23||25.8||99||99||92||A|
|Alpha & Omega Semicondtr||AOSL||21||17.6||84||91||90||A|
|Lennar Corp Cl A||LEN||18||14.7||80||98||60||A|
|Triton International Ltd||TRTN||18||16.6||94||96||87||A|
Rating Potential Oracle Of Omaha Stocks
While using different criteria than those used for this list of Warren Buffett stocks, CDNS, MPWR and DQ stock, for example, score the highest-possible 99 Composite Rating. Copart (CPRT) holds a 98 rating, meaning it is outpacing 98% of all companies in terms of key stock-picking traits.
GOOGL stock currently has a 76 Composite Rating in Stock Checkup.
Including Alphabet and retailers Boot Barn and Five Below, many companies on the list do meet typical Warren Buffett criteria but do not meet some benchmarks 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.
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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