With its track record of sustainable growth, Alphabet also earns a spot on IBD Long-Term Leader, fitting many of the parameters of Warren Buffett stocks. Alphabet has also secured placement on IBD Sector Leaders.
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 Alphabet, the newly-named Meta Platforms, Alibaba and Sprouts Farmers Market that are in sync with his focus on management quality and long-term growth.
Looking at the closely watched Berkshire Hathaway portfolio, Buffett and team have exited drugmaker Merk (MRK) and slashed holdings in AbbVie (ABBV) and Bristol-Myers Squibb (BMY). Inclusion of Alibaba, Sprouts and Williams-Sonoma reflect Berkshire’s increased holdings in consumer stocks such as Kroger (KR) and RH (RH).
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 Dec. 16, 2021
|Company||Symbol||Sustainable Growth %||ROE 5-Yr Avg||Comp Rating||EPS Rating||RS Rating||SMR Rating|
|Logitech Intl Sa||LOGI||50||38.3||53||80||21||B|
|D R Horton Inc||DHI||29||20.4||98||99||93||A|
|Williams Sonoma Inc||WSM||41||45.4||83||94||84||A|
|Meta Platforms Inc Cl A||FB||25||21.9||90||95||71||A|
|Lennar Corp Cl A||LEN||18||12.6||98||96||91||B|
|Alibaba Group Hldg Ads||BABA||21||19.8||44||79||10||B|
|Green Brick Partners Inc||GRBK||20||13.5||99||93||95||A|
|Sprouts Farmers Market||SFM||37||26.8||88||75||89||C|
|Winnebago Industries Inc||WGO||29||18.9||85||94||55||A|
|Daqo New Energy Corp Ads||DQ||22||17||71||95||11||A|
|Alphabet Inc Cl A||GOOGL||17||16.6||97||98||92||A|
Rating Potential Oracle Of Omaha Stocks
While using different criteria than that used for this list of Warren Buffett stocks, global IT consulting firm Perficient for example, earns a 98 Composite Rating. Perficient soared to a new all-time high in November before pulling back. GOOGL stock earns a 96 Composite Rating in Stock Checkup, while fellow FANG play FB stock scores a 89, meaning it is outpacing 89% of all companies in terms of key stock-picking traits.
Like Alibaba, some companies on the list 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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