Warren Buffett Stocks: Google Soars As LULU Stretches For Support

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.


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.

After blasting past a buy in November, TGLS stock, ranking No. 1 on the IBD 50, has pulled back to again test support at its 10-week line. Mueller Industries continues to test the top of its buy zone following a breakout earlier this month.

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.

Build Your Watchlist With The IBD Stock Screener

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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