IBD Long-Term Leader Cadence Design Systems (CDNS) and Monolithic Power Systems (MPWR) join Lululemon Athletica (LULU) and Google parent Alphabet (GOOGL) on this screen of Warren Buffett stocks, based on the investing strategy of the Berkshire Hathaway CEO.
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Highlighting Warren Buffett Stocks
Including GOOGL stock, CDNS and MPWR, which has returned to the IBD Long-Term Leaders watchlist, 42 companies make this stock screen.
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.)
Meanwhile, including Atkore, Builders FirstSource (BLDR) and Steel Dynamics (STLD), seven companies on this screen had sustainable growth rates above 50%. Pool (POOL), Cross Country Healthcare (CCRN), Williams-Sonoma (WSM) and solar energy play Daqo New Energy (DQ) also earned that distinction.
Lululemon and Nucor (NUE) both just miss that distinction with a 44% sustainable growth rate. LULU stock gapped up in huge volume after reporting earnings on Tuesday.
In addition, Reliance Steel (RS) joins NUE and STLD stock in forging a spot on this screen of Warren Buffett stocks.
Retail stocks Boot Barn (BOOT) and Buckle (BKE) find shelf space on the list alongside Lululemon and Williams-Sonoma.
Led by D.R. Horton (DHI), homebuilders have fabricated a strong presence on this screen. PulteGroup (PHM), Meritage Homes (MTH), and Tri Pointe Homes (TPH) also make the screen.
GOOGL Joins Tech Names Among 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).
The list below highlights Warren Buffett stocks like Alphabet, Cadence Design Systems and Monolithic Power Systems in sync with Buffett’s focus on management quality and long-term growth.
Additionally, reflecting improvement in the tech sector following the trouncing it took in last year’s bear market, the screen also picks up a number of other tech names. The latest list of Warren Buffett stocks also includes STMicroelectronics (STM), PTC (PTC), United Microelectronics (UMC), Epam Systems (EPAM) and Chinese online gaming platform NetEase (NTES).
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 April 20, 2023
| Company | Symbol | Current Price | Sustainable Growth % | ROE 5-Yr Avg | Comp Rating | EPS Rating | RS Rating | SMR Rating |
|---|---|---|---|---|---|---|---|---|
| Atkore | ATKR | 133.21 | 90 | 72.1 | 93 | 92 | 94 | A |
| Builders FirstSource | BLDR | 95.34 | 63 | 45.1 | 94 | 97 | 96 | A |
| Daqo New Energy | DQ | 45.12 | 62 | 30.3 | 83 | 99 | 36 | A |
| Williams-Sonoma | WSM | 123.25 | 55 | 47.1 | 69 | 90 | 38 | A |
| Steel Dynamics | STLD | 114.63 | 54 | 38.4 | 83 | 82 | 91 | B |
| Cross Country Healthcare | CCRN | 23.16 | 52 | 27.4 | 35 | 82 | 24 | B |
| Pool | POOL | 328.82 | 50 | 60.4 | 68 | 86 | 34 | B |
| Lululemon Athletica | LULU | 374.56 | 44 | 31.1 | 97 | 97 | 88 | A |
| Nucor | NUE | 157.95 | 44 | 32 | 72 | 68 | 75 | B |
| Cadence Design Systems | CDNS | 214.57 | 43 | 36.1 | 99 | 97 | 94 | A |
| Mueller Industries | MLI | 69.23 | 40 | 29.4 | 86 | 89 | 83 | B |
| Boot Barn | BOOT | 73.27 | 38 | 26.4 | 71 | 75 | 56 | B |
| Winnebago Industries | WGO | 59.68 | 36 | 26.6 | 83 | 64 | 77 | B |
| Old Dominion Freight Line | ODFL | 349.11 | 34 | 28.3 | 95 | 97 | 91 | A |
| STMicroelectronics | STM | 47.36 | 34 | 22.1 | 98 | 98 | 95 | A |
| Commercial Metals | CMC | 48.91 | 33 | 23.7 | 87 | 93 | 79 | A |
| Expeditors International | EXPD | 112.15 | 33 | 36.2 | 89 | 83 | 85 | B |
| D.R. Horton | DHI | 109.04 | 32 | 25.8 | 95 | 92 | 94 | B |
| Monolithic Power Systems | MPWR | 463.07 | 30 | 29.3 | 98 | 99 | 90 | A |
| PulteGroup | PHM | 64.09 | 30 | 21.4 | 98 | 99 | 96 | A |
| Evercore | EVR | 124.11 | 28 | 45.7 | 78 | 57 | 87 | C |
| Meritage Homes | MTH | 128.99 | 28 | 21 | 99 | 97 | 97 | A |
| UFP Industries | UFPI | 81.07 | 27 | 22.4 | 73 | 93 | 64 | B |
| Copart | CPRT | 78.29 | 26 | 26.3 | 96 | 90 | 94 | A |
| PTC | PTC | 125.64 | 25 | 22.6 | 93 | 92 | 84 | A |
| Regeneron Pharmaceuticals | REGN | 801.96 | 25 | 31.7 | 90 | 66 | 89 | B |
| Reliance Steel | RS | 253.14 | 25 | 19.6 | 84 | 81 | 93 | B |
| EPAM Systems | EPAM | 284.43 | 24 | 20.6 | 59 | 95 | 26 | A |
| Alphabet | GOOGL | 104.56 | 24 | 22 | 82 | 73 | 60 | B |
| West Pharmaceutical Services | WST | 362.26 | 24 | 22.5 | 95 | 84 | 95 | B |
| Perion Network | PERI | 37.35 | 23 | 15.7 | 97 | 98 | 98 | A |
| Shutterstock | SSTK | 68.85 | 23 | 25.5 | 95 | 97 | 87 | A |
| Tri Pointe Homes | TPH | 27.14 | 22 | 16.7 | 98 | 97 | 96 | B |
| NetEase | NTES | 91.83 | 21 | 21.4 | 85 | 89 | 81 | B |
| Houlihan Lokey | HLI | 93.1 | 19 | 27.2 | 69 | 62 | 77 | C |
| Diamondback Energy | FANG | 140.9 | 17 | 16.4 | 83 | 97 | 72 | A |
| Quanta Services | PWR | 167.67 | 17 | 14.5 | 92 | 94 | 91 | B |
| Buckle | BKE | 34.59 | 16 | 46.6 | 74 | 83 | 47 | A |
| Danaher | DHR | 247.68 | 16 | 14.7 | 64 | 89 | 38 | B |
| Triton International | TRTN | 83.22 | 16 | 19.4 | 89 | 90 | 94 | A |
| United Microelectron | UMC | 8.29 | 16 | 12.1 | 92 | 93 | 90 | A |
| Globant | GLOB | 156.15 | 15 | 14 | 69 | 98 | 25 | A |
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 stocks.
On the tech side, Cadence Design Systems and STMicroelectronics make both lists.
Also, from the building sector, Atkore, Meritage Homes, and Tri Pointe Homes all make the cut.
IBD Stock Ratings Vs. The Oracle Of Omaha
IBD uses different criteria than those used for this list of Warren Buffett stocks. CDNS stock, for example, scores the highest-possible 99 Composite Rating. The rating means the stock is outpacing 99% of all companies in terms of key stock-picking traits. MPWR (98) and LULU stock (97) also earn very strong ratings in IBD Stock Checkup.
As GOOGL stock continues to rebound following all the carnage in the tech sector last year, its Composite Rating has improved to 82.
Including Alphabet, 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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