Google parent Alphabet (GOOGL), alongside other top AI firms, earns a spot on this screen emulating Warren Buffett stocks based on the investing strategy of the Berkshire Hathaway CEO. The search and artificial intelligence giant remains in buy range as it unveils the biggest update yet to its AI model.
Alone on this screen among the Magnificent Seven stocks, Google stock cleared a 139.42 buy point from a cup with handle at the end of last year. It currently trades near the top of its buy range.
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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.
Other top tech and AI stocks joining Alphabet include Arista Networks (ANET), STMicroelectronics (STM), Epam Systems (EPAM), Globant (GLOB), Monolithic Power Systems (MPWR) and Lattice Semiconductor (LSCC).
Meanwhile, like Google, STM stock has built a cup with handle. The buy point is 51.27. STMicroelectronics has also tapped the AI boom with its work on Edge AI, as well as a collaboration with Nvidia (NVDA) on the STM32Cube. AI and Nvidia TAO Toolkit.
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Other notable names on this stock screen include fashionable firms ELF Beauty (ELF) and Lululemon Athletica (LULU).
Additionally, homebuilders PulteGroup (PHM), Lennar (LEN), Toll Brothers (TOL) and Taylor Morrison Home (TMHC) have also secured a spot on the list.
Energy sector firms Enerplus (ERF) and Daqo New Energy (DQ) have also powered their way onto this screen.
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Sustainable Earnings Growth In Focus
Canadian oil & gas exploration firm Enerplus tops the list with a sustainable earnings growth rate of 76%. (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.)
DQ stock, which has seen its Composite Rating drop to a far-from-sunny 19, still sports a 61% sustainable earnings growth rate.
This screen of Warren Buffett stocks showcases three other companies sporting a sustainable growth rate over 50%. Atkore (ATKR), Lattice Semiconductor and Sociedad Quimica (SQN) also hit that benchmark.
Google Stock In Sync 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 addition to the annual reports, take a look at what’s inside Berkshire Hathaway’s portfolio to track Warren Buffett’s latest moves.
However, while the computer-generated stock screen below is not a list of companies necessarily owned by Buffett or Berkshire, it highlights Warren Buffett stocks like Alphabet and Lululemon 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 Jan. 19, 2024.
| Company | Symbol | Sustainable Growth % | ROE 5-Yr Avg | Comp Rating | EPS Rating | RS Rating | SMR Rating |
|---|---|---|---|---|---|---|---|
| Enerplus | ERF | 72 | 39.8 | 26 | 54 | 17 | B |
| Daqo New Energy | DQ | 61 | 30.1 | 19 | 49 | 8 | B |
| Atkore | ATKR | 56 | 78 | 86 | 79 | 82 | B |
| Lattice Semiconductor | LSCC | 55 | 36.2 | 78 | 97 | 19 | A |
| Sociedad Quimica | SQM | 51 | 36.2 | 22 | 61 | 11 | B |
| Lululemon Athletica | LULU | 44 | 41.2 | 99 | 98 | 91 | A |
| Nucor | NUE | 41 | 32.1 | 68 | 66 | 72 | B |
| STMicroelectronics | STM | 34 | 22.1 | 66 | 89 | 41 | A |
| Arista Networks | ANET | 33 | 26 | 99 | 98 | 97 | A |
| Mueller Industries | MLI | 33 | 29.4 | 88 | 80 | 90 | B |
| Axcelis Technologies | ACLS | 30 | 17.4 | 85 | 98 | 26 | A |
| Old Dominion Freight Line | ODFL | 30 | 28.3 | 63 | 78 | 54 | B |
| PulteGroup | PHM | 29 | 24.3 | 95 | 95 | 96 | A |
| ExlService | EXLS | 28 | 21.9 | 85 | 97 | 58 | A |
| Camtek | CAMT | 27 | 20.3 | 89 | 87 | 99 | B |
| Boot Barn | BOOT | 25 | 23.3 | 59 | 78 | 22 | B |
| E.L.F. Beauty | ELF | 25 | 23.6 | 98 | 98 | 98 | A |
| Taylor Morrison Home | TMHC | 25 | 17.1 | 92 | 74 | 93 | B |
| Epam Systems | EPAM | 24 | 20.6 | 92 | 88 | 82 | B |
| Alphabet | GOOGL | 24 | 22 | 98 | 97 | 88 | A |
| Monolithic Power Systems | MPWR | 23 | 29.3 | 93 | 82 | 93 | B |
| Mosaic | MOS | 22 | 17 | 18 | 53 | 15 | B |
| Commercial Metals | CMC | 21 | 23.4 | 69 | 74 | 64 | C |
| Rush Enterprises A | RUSHA | 20 | 15.9 | 80 | 77 | 82 | A |
| Toll Brothers | TOL | 20 | 17.6 | 94 | 87 | 95 | B |
| Globant | GLOB | 15 | 14 | 99 | 96 | 92 | A |
IBD Stock Ratings Vs. The Oracle Of Omaha
IBD uses different criteria to build this screen emulating certain characteristics of Warren Buffett stocks than those Buffett generally uses. For example, ANET and LULU sport the highest-possible 99 Composite Rating. ELF and Google stock are just behind with a 98.
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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