Which companies qualify as potential Warren Buffett stocks? Lululemon Athletica (LULU), Veeva Systems (VEEV) and Logitech International (LOGI) are among 12 stocks on this screen. LULU stock tops the list in terms of sustainable growth.
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 Cadence Design Systems (CDNS), Lululemon, Veeva, Logitech and D.R. Horton (DHI) that are in sync with his focus on management quality and long-term growth.
In the closely watched Berkshire Hathaway portfolio, Buffett took a huge stake in Verizon (VZ) while dumping JPMorgan Chase (JPM) entirely. CBS News reported that Buffett’s insurance conglomerate has made nearly $100 billion from its stake in Apple (AAPL).
Created in MarketSmith, the screen below emphasizes metrics 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 growth.
- 12% or better 5-year average return on equity.
Investor’s Business Daily uses a different stock-picking strategy than Warren Buffett. Still, given their long history of strong and stable earnings growth, VEEV stock and CDNS stock are also on IBD Long-Term Leaders.
Warren Buffett Stocks: MarketSmith Screen
Screen created using MarketSmith | Data as of March 3, 2021
|Company||Symbol||Sustainable Growth %||EPS % Growth 5 Yr Pct Rnk||ROE 5-Yr Avg||EPS Rating||RS Rating||SMR Rating||Comp Rating|
|Cadence Design Systems||CDNS||34||78||34.9||97||78||A||95|
|Veeva Systems Inc Cl A||VEEV||24||93||24.9||99||61||A||85|
|Mitek System Inc||MITK||24||81||18.9||91||81||A||92|
|Logitech Intl Sa||LOGI||24||86||41||99||86||A||99|
|D R Horton Inc||DHI||19||85||18.5||99||55||A||92|
|West Pharmaceutical Svcs||WST||18||75||14.9||96||57||A||86|
|One-800Flowers.com Cl A||FLWS||18||80||17.1||91||54||A||73|
|Progressive Corp Ohio||PGR||18||92||22.2||98||34||A||66|
Rating Potential Oracle Of Omaha Stocks
While using different criteria than used for this list of Warren Buffett stocks, Logitech, HZO stock and CDNS stock, all earn a passing score in Stock Checkup for their 95 or higher Composite Rating.
But some stocks on this list do not have a 95 or higher Composite Rating. Veeva, LULU stock, DHI stock and CDNS stock have all fallen below that benchmark.
Plus, others do meet typical Warren Buffett criteria, but do not meet some certain benchmarks CAN SLIM investors typically look for in the other IBD SmartSelect 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.
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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