Google stock has bounded back onto this screen emulating Warren Buffett stocks based on the investing strategy of the Berkshire Hathaway CEO. Since Alphabet (GOOGL) beat Q1 earnings estimates on April 25, the stock has continued its ascent, buoyed by fresh artificial intelligence initiatives.
Note that inclusion on this screen does not necessarily mean the Oracle of Omaha owns shares in these companies. Rather, it identifies stocks in sync with Buffett’s focus on sustainable earnings growth and other factors.
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Now trying to hold support after a post-earnings spike of its own, Lululemon Athletica (LULU) joins Boot Barn (BOOT) on this stock screen. Along with Builders FirstSource (BLDR) and homebuilders PulteGroup (PHM), D.R. Horton (DHI) and Tri Pointe Homes (TPH), a total of 38 companies make the cut.
While Google stock, PHM, BLDR, Copart (CPRT) and others have climbed out of buy range, several remain in or near a buy zone.
Expeditors International (EXPD), Quanta Services (PWR), Power Integrations (POWI) and Reliance Steel (RS) all fit the bill. So do Owens Corning (OC), Amphastar Pharmaceuticals (AMPH) and IBD Long-Term Leader Cadence Design Systems (CDNS).
Although LULU stock has slipped below its recent buy zone, see if the stock can find support at its 50-day moving average and rebound. Meanwhile, Monolithic Power Systems (MPWR), STMicroelectronics (STM) and NetEase (NTES) are also searching for support while trying to refurbish their chart patterns.
Sustainable Earnings Growth In Focus
Building materials manufacturer Atkore (ATKR) tops the list with an impressive sustainable earnings growth rate of 90%. (The rate is computed by multiplying the company’s ROE by the earnings retention ratio, which is the percentage of earnings not paid out as dividends.)
Along with Atkore, Builders FirstSource, Steel Dynamics (STLD), Cross Country Healthcare (CCRN) and solar energy play Daqo New Energy (DQ), these five companies sport a sustainable growth rate over 50%.
Another five have sustainable growth rates between 40% and 49%. Lululemon, Cadence Design Systems, Nucor (NUE), Tecnoglass (TGLS) and Mueller Industries (MLI) hit that mark.
Lululemon, Google In Style With Warren Buffett Stocks
Since the Oracle of Omaha has never written a book detailing his investment strategy, there’s no definitive buying checklist. But parts of Buffett’s stock-picking strategy can be gleaned from the annual reports of Berkshire Hathaway (BRKB).
In Q1, Berkshire disclosed its latest holdings, including buying Capital One Financial (COF) stock for the first time. Buffett and his team expanded three of the top five holdings, increasing ownership in Apple (AAPL), Occidental Petroleum (OXY) and Bank of America (BAC).
While this computer-generated stock screen is not a list of companies necessarily owned by Buffett or Berkshire, it highlights Warren Buffett stocks like Alphabet, Lululemon, Monolithic Power Systems, Copart (CPRT) and Diamondback Energy (FANG) in sync with Buffett’s focus on management quality and long-term growth.
Created in MarketSmith, the screen below emphasizes metrics to use 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:
- In the top 25% of all stocks in terms of five-year annual EPS growth rate.
- 15% or greater sustainable earnings growth.
- 12% or better five-year average return on equity.
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Warren Buffett Stocks: MarketSmith Screen
Screen created using MarketSmith Data as of May 23
| Company | Symbol | Current Price | Sustainable Growth % | ROE 5-Yr Avg | Comp Rating | EPS Rating | RS Rating | SMR Rating |
|---|---|---|---|---|---|---|---|---|
| Atkore | ATKR | 123.04 | 90 | 78.6 | 88 | 85 | 81 | A |
| Builders FirstSource | BLDR | 117.44 | 63 | 45.1 | 94 | 88 | 98 | B |
| Daqo New Energy | DQ | 38.82 | 61 | 30.1 | 42 | 88 | 20 | B |
| Steel Dynamics | STLD | 94.92 | 54 | 38.4 | 56 | 69 | 57 | B |
| Cross Country Healthcare | CCRN | 25.36 | 52 | 27.4 | 54 | 67 | 67 | B |
| Tecnoglass | TGLS | 44.6 | 49 | 31.5 | 99 | 99 | 98 | A |
| Lululemon Athletica | LULU | 361.33 | 44 | 31.1 | 93 | 97 | 89 | A |
| Cadence Design Systems | CDNS | 207.46 | 43 | 36.1 | 98 | 96 | 92 | A |
| Nucor | NUE | 137.19 | 43 | 32 | 48 | 63 | 44 | B |
| Mueller Industries | MLI | 79.6 | 40 | 29.4 | 90 | 94 | 91 | B |
| Winnebago Industries | WGO | 56.62 | 36 | 26.6 | 67 | 64 | 49 | B |
| Expeditors International | EXPD | 114.82 | 34 | 36.2 | 79 | 66 | 75 | C |
| STMicroelectronics | STM | 44.76 | 34 | 22.1 | 95 | 97 | 84 | A |
| Commercial Metals | CMC | 44.96 | 33 | 23.7 | 79 | 93 | 49 | A |
| Old Dominion Freight Line | ODFL | 300.91 | 33 | 28.3 | 78 | 91 | 57 | A |
| D.R. Horton | DHI | 106.37 | 32 | 25.8 | 93 | 78 | 95 | B |
| Monolithic Power Systems | MPWR | 437.8 | 31 | 29.3 | 95 | 98 | 61 | A |
| PulteGroup | PHM | 66.11 | 30 | 24.3 | 98 | 99 | 97 | A |
| MarineMax | HZO | 28.59 | 29 | 22 | 48 | 71 | 21 | B |
| Copart | CPRT | 88.82 | 26 | 26.3 | 94 | 96 | 96 | A |
| Boot Barn | BOOT | 66.92 | 25 | 20.6 | 56 | 84 | 34 | A |
| Epam Systems | EPAM | 264.88 | 24 | 20.6 | 48 | 89 | 17 | A |
| Alphabet | GOOGL | 123.97 | 24 | 22 | 95 | 75 | 93 | B |
| Owens Corning | OC | 109.39 | 24 | 20.4 | 94 | 87 | 90 | B |
| Reliance Steel | RS | 242.47 | 24 | 19.6 | 83 | 73 | 89 | B |
| West Pharmaceutical Services | WST | 347.97 | 24 | 22.5 | 91 | 81 | 92 | B |
| Perion Network | PERI | 31.4 | 23 | 15.7 | 91 | 98 | 93 | A |
| Shutterstock | SSTK | 54.73 | 23 | 25.5 | 75 | 97 | 28 | A |
| Tri Pointe Homes | TPH | 29.54 | 22 | 16.7 | 96 | 91 | 97 | B |
| Amphastar Pharm | AMPH | 45.42 | 21 | 13 | 99 | 99 | 95 | A |
| NetEase | NTES | 85.72 | 21 | 21.4 | 91 | 90 | 81 | B |
| Triton International | TRTN | 83.43 | 18 | 19.4 | 80 | 80 | 93 | B |
| Quanta Services | PWR | 168.59 | 17 | 14.5 | 92 | 87 | 92 | B |
| Danaher | DHR | 233.26 | 16 | 14.7 | 65 | 84 | 29 | B |
| Power Integrations | POWI | 86.63 | 16 | 19.3 | 81 | 54 | 83 | C |
| Archer Daniels Midland | ADM | 74.07 | 15 | 13.5 | 60 | 95 | 26 | B |
| Globant | GLOB | 173.71 | 15 | 14 | 79 | 96 | 39 | A |
| United Microelectronics | UMC | 7.89 | 15 | 12.1 | 83 | 83 | 75 | B |
Warren Buffett Stocks In Demand By Top Funds
The latest list of new buys by the best mutual funds features several names also highlighted in this screen of Warren Buffett-style stocks.
Lululemon, Copart, Mueller Industries, Tecnoglass and homebuilders PulteGroup and Tri Pointe Homes all make both lists.
IBD Stock Ratings Vs. The Oracle Of Omaha
IBD uses different criteria to build this screen emulating certain characteristics of Warren Buffett stocks, than Buffett generally uses. For example, TGLS and AMPH stock earn the highest-possible 99 Composite Rating.
CDNS, PHM and TPH stock score a 98. That rating means these leaders are outpacing 98% of all companies in terms of key stock-picking traits. Also, Lululemon, Copart, Novartis and many others earn strong ratings in IBD Stock Checkup.
Google stock continues its rebound following all the carnage in the tech sector last year, with its Composite Rating rebounding to 95.
Many companies on the list do meet typical Warren Buffett criteria but do not meet some benchmarks that CAN SLIM investors seek in the other stock 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.
Similarly, 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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