by 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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