Which companies qualify as potential Warren Buffett stocks? PayPal (PYPL), Logitech (LOGI), Williams-Sonoma (WSM), D.R. Horton (DHI), Sprouts Farmers Market (SFM) and Alibaba (BABA) are among 10 stocks on this screen.
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 BABA stock, PayPal, Williams-Sonoma, Logitech and Cadence Design Systems that are in sync with his focus on management quality and long-term growth.
Looking at the closely watched Berkshire Hathaway portfolio, Buffett revealed more exposure to consumer stocks while selling drug stocks. That trend reflects the names on this stock screen, such has Alibaba, Williams-Sonoma and 1-800-FLOWERS (FLWS).
While several names on this list have hit resistance and sold off recently, Ciena and DHI stock are working on new chart patterns. CDNS stock has been rising nicely since its breakout at the end of July. WSM stock flashed a short-lived jump past its buy point after reporting earnings Aug. 25, but has pulled back below it.
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.
Warren Buffett Stocks: MarketSmith Screen
Screen created using MarketSmith | Data as of Aug. 27, 2021
|Company||Symbol||Sustainable Growth %||ROE 5-Yr Avg||Comp Rating||EPS Rating||RS Rating||SMR Rating|
|Logitech Intl Sa||LOGI||54||35.7||70||98||50||A|
|Williams Sonoma Inc||WSM||40||40.3||97||97||92||A|
|Sprouts Farmers Market||SFM||37||26.8||60||74||48||C|
|Cadence Design Systems||CDNS||34||34.9||93||93||86||A|
|One-800Flowers.com Cl A||FLWS||27||17.1||70||78||60||B|
|PayPal Holdings Inc||PYPL||25||19.8||89||89||72||A|
|Alibaba Group Hldg Ads||BABA||21||24.6||49||92||5||A|
|D R Horton Inc||DHI||19||18.5||91||98||74||A|
Rating Potential Oracle Of Omaha Stocks
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.
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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