Warren Buffett Stocks: MSFT, GOOGL among 32 names on this screen

As this year’s bear market has ripped tech stocks apart, IBD Long-Term Leaders Microsoft (MSFT) and Monolithic energy systems (MPWR) maintain their spot on this screen of Warren Buffett stock, which is based on the investment strategy of the Berkshire Hathaway CEO.




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Showcasing Warren Buffett Stocks

Alphabet (GOOGL), like Microsoft, kept its place on the screen despite the weak results of the past quarter. While GOOGL stock recently fell off the IBD Long-Term Leaders list, the search and cloud giant retains its spot on Warren Buffett’s stock screen.

Meanwhile, retail supplies Lululemon Athletica (LULU), Boot shed (BOAT) and Lithium engines (LAD) also makes this screen with 32 companies.

Manufacturer of building materials Atkore (ATKR) tops the list with an impressive 90% sustainable earnings growth. (The percentage is calculated by multiplying the company’s ROE by the earnings retention ratio, which is the percentage of earnings not paid out as dividends.)

Regeneron Pharmaceuticals (REGN) came next with a sustainable win rate of 57%.

Financial consultancy firm Evercore (EVR), playing on solar energy Daqo New Energy (DQ) and steel stock nuclear (NUE) have also delivered sustained growth rates of over 50%.

Homebuilders DR Horton (DHI), PulteGroup (PHM) and lennar (LEN) joins decking materials firm Trex (TREX) on the screen.

Leader in public safety technology Axon Enterprise (AXON) has secured a spot on the screen. Although it has fallen under pressure from market indices, AXON stock has soared in recent weeks, before and after reporting earnings on November 8.

Since the Oracle of Omaha has never written a book detailing its investment strategy, there is no definitive buying checklist. But parts of its stock-picking strategy can be gleaned from the annual reports of Berkshire Hathaway (BRKB).

The list below highlights Warren Buffett stocks such as Microsoft, Alphabet, Lululemon, Daqo New Energy, Atkore, and Axon that are in sync with his focus on management quality and long-term growth.

Looking at Berkshire Hathaway’s closely watched portfolio, Buffett and his team continue to hold large stakes in it Apple (AAPL), Western petroleum (OXY), bank of America (BAC) and Chevron (CVX).

In the third quarter of 2022, Buffett opened a significant stake in Taiwan semiconductor (TSM). Taiwan Semi is the world’s largest contract chip maker and a major chip supplier to Apple. Berkshire Hathaway also took stock Louisiana Pacific (LPX), a manufacturer of engineered wood construction products and components.

Created in MarketSmith, the screen below highlights metrics to use when looking for companies with long-term past growth and potential future growth. To make the list, each stock must meet a wide variety of criteria, including:

  • In the top 25% of all stocks in terms of five-year growth rate of earnings per share.
  • 15% or more sustainable profit growth.
  • 12% or better average return on equity over five years.

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Warren Buffett Stocks: MarketSmith Screen

Screen created with MarketSmith | Data as of December 19

Business Symbol Sustainable Growth % ROE 5-year average Comp rating EPS rating RS rating SMR assessment
Atkore ATKR 90% 72.1 95 98 96 A
Regeneron pharmaceuticals REGN 57 35.1 87 67 88 B
Evercore EVR 54 51.2 85 65 83 B
Daqo New Energy DQ 52 22.6 85 94 36 A
nuclear NOW 52 25.4 87 89 89 B
Boot shed BOOT 38 23.5 69 81 20 B
Lululemon Athletica LULU 38 36.9 97 97 66 A
Trex TREX 38 34.2 51 83 18 B
Owens & Minor OMI 37 20.4 46 59 13 C
Winnebago Industries WHO 37 26.6 70 79 63 B
Kulicke & Soffa Industries CLICK 36 25 80 73 69 B
Microsoft MSFT 33 39.7 67 88 40 A
DR Horton DHI 32 24.2 98 98 93 A
Lithium engines BOY 31 20.5 62 88 23 A
Alphabet GOOGL 29 20.3 46 78 23 B
Pharmaceutical Services West WST 29 20.6 42 85 18 A
Next Star Media NXST 27 24.1 87 98 77 B
Co part CPRT 26 26.3 91 89 77 A
Old Dominion cargo line ODFL 26 22.8 98 98 86 A
PulteGroup PHM 26 21.4 99 99 87 A
Monolithic energy systems MPWR 24 25.8 75 99 28 A
Trust Steel & Aluminum RS 23 15.5 98 93 92 A
Saia SAIA 23 16.1 97 98 86 A
Quest diagnosis DGX 21 21.8 70 65 87 C
lennar LEN 21 14.7 98 96 92 A
Powerful integrations POWI 19 15.9 66 87 45 B
Perion Networks PERI 18 13.2 96 97 95 A
Meridian biosciences VIVO 18 17.7 89 69 95 B
Axon Enterprise AXON 17 12.9 97 83 97 B
Triton International TRTN 16 16.1 98 95 92 A
PotlatchDeltic PCH 15 19 52 61 52 B
America UHAL 15 14.8 89 75 86 B

IBD Stock Ratings Vs. The Oracle of Omaha

IBD uses different criteria than those for this list of Warren Buffett stocks. For example, Axon and Lululemon score a 97 Composite Rating. The rating means that both stocks outperform 97% of all companies on key stock-picking traits.

After all the carnage in the tech sector, MSFT has dropped to a 67 Composite Rating, while GOOGL shares have sunk to a 46 in Stock Checkup.

Yet many of the companies on the list, including Microsoft and Alphabet, meet typical Warren Buffett criteria but fail to meet certain benchmarks that CAN SLIM investors look for in the other stock ratings that measure a company’s fundamental, as well as technical, strength.

Ranging from 1 (worst) to 99 (best), the Composite Rating shows how strongly a company demonstrates the seven telltale signs of winning stocks. For example, a rating of 95 means that the company outperforms 95% of all other stocks on key fundamental and technical selection criteria.

The EPS Rating tracks a company’s annual and quarterly earnings growth, then measures how the numbers compare to those of all other stocks. So like the Composite Rating, a score of 95 means the company’s earnings per share growth is in the top 5% of all stocks.

Similarly, the SMR rating identifies stocks with strong fundamentals and 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 on those key fundamental performance metrics. Because it aligns with the legendary investor’s focus on a company’s fundamentals, this can be an especially helpful assessment for investors looking for potential Warren Buffett stocks.

Follow Matthew Galgani on Twitter @IBD_MGalgani.

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