by Long-term leader of IBD cadence design systems (CDNS) and Monolithic power systems (MPWR) join parent Google Alphabet (GOOGL) on this stock screen by Warren Buffett, based on the Berkshire Hathaway CEO’s investment strategy.
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Highlight for Warren Buffett’s stocks
Including GOOGL, CDNS and MPWR stocks, 41 companies make this stock screen.
building materials manufacturer Atkore (ATKR) tops the list with an impressive 90% sustainable earnings growth rate. (The rate is calculated by multiplying the company’s ROE by the earnings retention ratio, which is the percentage of earnings not distributed as dividends.)
Meanwhile, including Atkore, FirstSource Builders (BLDR) and Steel Dynamics (STLD), five companies on this screen had sustainable growth rates above 50%. Pool (POOL) and solar energy game daqo new energy (DQ) has also earned this distinction.
nucor (NUE) loses that distinction with a sustainable growth rate of 44%. Reliance Steel (RS) (25%) and Brazilian steel producer Gerdau (GGB) (17%) also do this screening of Warren Buffett’s stock.
retail stocks Lululemon Athletica (LULU), boot barn (BOOT) and Buckle (BKE) also do the cutting.
Led by DR Horton (DHI), home builders made a strong presence on this screen. SkipGroup (PHM), Lennar (LEN), Meritage Homes (MT) and Tri Pointe Residences (TPH) are also on the list.
GOOGL joins tech names among Warren Buffett stocks
Since the Oracle of Omaha has never written a book detailing its investment strategy, there is no definitive buying checklist. But parts of Buffett’s stock-picking strategy can be deduced from the company’s annual reports. Berkshire Hathaway (BRKB).
The list below highlights Warren Buffett’s actions such as Alphabet, Cadence Design Systems and Monolithic Power Systems in sync with Buffett’s focus on quality management and long-term growth.
In addition, reflecting the improvement in the technology sector after last year’s bear market hit, the display also features several other technology names. Warren Buffett’s latest stock list also includes STMicroelectronics (STM), PTC (PTC), Epam systems (EPAM) and Chinese online gaming platform NetEase (NTES).
Built in MarketSmith, the canvas below emphasizes the metrics to use when looking for companies with long-term past growth and future potential. To make the list, each stock must meet a wide range of criteria, including:
- In the top 25% of all stocks in terms of five-year annual EPS growth rate.
- 15% or more sustainable earnings growth.
- 12% or better return on average five-year equity.
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Warren Buffett Stocks: MarketSmith Screen
Canvas created using MarketSmith March 17 data
| Company | Symbol | % sustainable growth | 5 year average ROE | Compensation Assessment | EPS Rating | RS Rating | SMR Rating |
|---|---|---|---|---|---|---|---|
| Atkore | ATKR | 90 | 72.1 | 95 | 92 | 95 | A |
| FirstSource Builders | BLDR | 63 | 45.1 | 96 | 97 | 95 | A |
| daqo new energy | QD | 62 | 22.6 | 87 | 99 | 63 | A |
| Steel Dynamics | STLD | 54 | 38.4 | 93 | 81 | 93 | B |
| Pool | POOL | 50 | 60.4 | 80 | 86 | 67 | B |
| nucor | NUE | 44 | 31.9 | 89 | 67 | 90 | B |
| cadence design systems | CDNS | 43 | 36.1 | 98 | 97 | 95 | A |
| Clearfield | CLFD | 39 | 22.6 | 44 | 99 | 8 | A |
| boot barn | BOOT | 38 | 26.4 | 86 | 76 | 85 | B |
| Lululemon Athletica | LULU | 38 | 36.9 | 88 | 97 | 42 | A |
| winnebago industries | WGO | 36 | 26.6 | 89 | 80 | 81 | B |
| Old Dominion Shipping Line | ODFL | 34 | 28.3 | 97 | 97 | 92 | A |
| STMicroelectronics | MTS | 34 | 17.4 | 98 | 98 | 95 | A |
| Commercial Metals | CMC | 33 | 23.7 | 93 | 99 | 84 | A |
| DR Horton | DHI | 32 | 25.8 | 95 | 91 | 94 | B |
| Monolithic power systems | MPWR | 30 | 29.3 | 99 | 99 | 93 | A |
| SkipGroup | PHM | 30 | 21.4 | 98 | 99 | 95 | A |
| evercore | EVR | 28 | 45.7 | 87 | 57 | 89 | W |
| Meritage Homes | MTH | 28 | 21 | 99 | 97 | 95 | A |
| UFP packaging | UFPI | 28 | 22.4 | 80 | 92 | 75 | B |
| Skirt | SKIRT | 26 | 18.7 | 97 | 91 | 94 | A |
| PTC | PTC | 25 | 22.6 | 90 | 93 | 80 | A |
| Regeneron Pharmaceutical | REGIME | 25 | 35 | 86 | 66 | 87 | B |
| Reliance Steel and Aluminum | LOL | 25 | 19.6 | 90 | 81 | 95 | B |
| super microcomputer | SMCI | 25 | 23.4 | 99 | 99 | 98 | A |
| Epam systems | EPAM | 24 | 20.5 | 59 | 95 | 25 | A |
| Alphabet | GOOGL | 24 | 22 | 68 | 73 | 54 | B |
| West Pharmaceutical Services | WST | 24 | 22.5 | 92 | 83 | 92 | B |
| perion nets | PERI | 23 | 15.7 | 98 | 98 | 98 | A |
| Shutterstock | SSTK | 23 | 25.5 | 94 | 97 | 93 | A |
| west lake | WLK | 23 | 17.4 | 63 | 50 | 71 | B |
| Tri Pointe Residences | TPH | 22 | 16.7 | 98 | 97 | 95 | B |
| Lennar | LEN | 21 | 17.3 | 96 | 87 | 94 | B |
| NetEase | NTES | 21 | 21.7 | 82 | 89 | 81 | B |
| newt international | TRTN | 18 | 19.4 | 86 | 90 | 58 | A |
| Gerdau | GGB | 17 | 15.7 | 82 | 80 | 58 | B |
| How much Services | PWR | 17 | 14.5 | 91 | 94 | 91 | B |
| Buckle | BKE | 16 | 53.3 | 91 | 83 | 80 | A |
| Danaher | DHR | 16 | 14.7 | 58 | 89 | 36 | B |
| global | GLOB | 15 | 14.4 | 66 | 98 | 17 | A |
| Laboratory Corp. of America | LE | 15 | 21.3 | 40 | 63 | 39 | W |
Warren Buffett’s stocks in demand by top funds
The latest list of new buys from the best mutual funds features several names also highlighted in this Warren Buffett stock screen.
On the technology side, Cadence Design Systems, Monolithic Power Systems and STMicroelectronics make both lists.
Also, from the construction sector, Atkore, Builders FirstSource, Meritage Homes and PulteGroup make the cut.
IBD vs. The Oracle of Omaha
IBD uses different criteria than those used for this list of Warren Buffett stocks. MPWR and SMCI, for example, score the highest possible composite rating of 99. The ranking means the stock is outperforming 99% of all companies in terms of key stock-picking characteristics. Cadence Design Systems obtains a score of 98 in the IBD Stock Checkup.
As GOOGL shares continue to rally after all the carnage in the tech sector last year, its composite ranking has improved to 68.
Including Alphabet, many companies on the list meet Warren Buffett’s typical criteria, but they don’t meet some benchmarks that CAN SLIM investors look for in other stock rankings that measure a company’s fundamental and technical strength.
Ranging from 1 (worst) to 99 (best), the composite score reveals how well a company is showing the seven telltale characteristics 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 selection criteria.
The EPS rating tracks a company’s annual and quarterly earnings growth, then measures how its numbers stack up against all other stocks. Like the composite score, a score of 95 means that the company’s EPS growth is in the top 5% of all stocks.
Similarly, by identifying stocks with strong fundamentals, the SMR Rating tracks sales growth, profit margins and overall return on equity. An A rating means that the company is in the top 20% of all stocks in terms of these key fundamental performance metrics. As it relates to the legendary investor’s focus on a company’s fundamentals, this could 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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