Google parent Alphabet (GOOGL), alongside another AI stock, earn a spot on this screen emulating Warren Buffett stocks based on the investing strategy of the Berkshire Hathaway CEO. The search and artificial intelligence leader continues to rebound from a post-earnings gap down that yanked GOOGL stock below its 50-day moving average in massive volume.
Alphabet soon shook off Wall Street’s concerns surrounding cloud growth, lifting it back above its 50-day line. Showing its strength as one the Magnificent Seven stocks, Google stock now trades just below a new 141.22 buy point.
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Like Alphabet, STMicroelectronics (STM) has also tapped the boom in artificial intelligence technologies. In addition to its work on Edge AI, STMicroelectronics has teamed up with AI powerhouse Nvidia (NVDA) on the STM32Cube. AI and Nvidia TAO Toolkit.
Also on this stock screen, Arista Networks (ANET) also counts as an AI play. Featured as an IBD Stock Of The Day on Aug. 14 and again on Oct. 4 before ANET launched another breakout on Oct. 31, the cloud computing and network firm sees AI revenue upside by 2025.
Note that inclusionon 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.
More Warren Buffett Stocks To Watch
With earnings due Dec. 7, Lululemon Athletica (LULU) has stretched beyond buy range after retaking a prior buy point earlier this month.
Looking to build on the stock market’s follow-through day on Nov. 1, other notable names on this screen for Warren Buffett stocks include Daqo New Energy (DQ), Nucor (NUE), Old Dominion Freight Line (ODFL), Boot Barn (BOOT) and Diamondback Energy (FANG).
Monolithic Power Systems (MPWR), Axcelis Technologies (ACLS) and Onto Innovation (ONTO) join STM stock on the list from the semiconductor sector. Other tech names include Synopsys (SNPS) and Epam Systems (EPAM).
Homebuilders PulteGroup (PHM), Lennar (LEN) and Taylor Morrison Home (TMHC) have also built a spot on the list.
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Sustainable Earnings Growth In Focus
Canadian oil & gas exploration firm Enerplus (ERF) has replaced solar energy firm Daqo New Energy as the top name on 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 30, still sports a 61% sustainable earnings growth rate.
In addition to Enerplus and Daqo, this screen of Warren Buffett stocks showcases three other companies sporting a sustainable growth rate over 40%. Lululemon, steel stocks Steel Dyamics (STLD) and Nucor (NUE), as well as LULU stock, also hit that benchmark.
GOOGL, LULU, ANET 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 Q2, Berkshire opened positions in Lennar and D.R. Horton (DHI), as well as NVR (NVR), for the first time. The company just reported Q3 earnings, surprising Wall Street to the upside as its insurance business — Geico in particular — delivered again.
To track Warren Buffett’s latest moves, take a look at what’s inside Berkshire Hathaway’s portfolio.
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 Nov. 27, 2023.
| Company | Symbol | Sustainable Growth % | ROE 5-Yr Avg | Comp Rating | EPS Rating | RS Rating | SMR Rating |
|---|---|---|---|---|---|---|---|
| Enerplus | ERF | 76 | 39.8 | 55 | 54 | 44 | B |
| Daqo New Energy | DQ | 61 | 30.1 | 30 | 49 | 11 | B |
| Steel Dynamics | STLD | 52 | 38.4 | 83 | 66 | 77 | B |
| Lululemon Athletica | LULU | 44 | 37.8 | 98 | 98 | 92 | A |
| Nucor | NUE | 43 | 32.1 | 75 | 66 | 62 | B |
| Mueller Industries | MLI | 35 | 29.4 | 81 | 80 | 84 | B |
| STMicroelectronics | STM | 34 | 22.1 | 77 | 89 | 66 | A |
| Arista Networks | ANET | 33 | 26 | 98 | 98 | 95 | A |
| Old Dominion Freight Line | ODFL | 32 | 28.3 | 84 | 78 | 88 | B |
| Axcelis Technologies | ACLS | 30 | 17.4 | 79 | 98 | 54 | A |
| PulteGroup | PHM | 30 | 24.3 | 93 | 95 | 96 | A |
| ExlService | EXLS | 28 | 21.9 | 70 | 97 | 26 | A |
| Monolithic Power Systems | MPWR | 28 | 29.3 | 87 | 82 | 90 | B |
| Mosaic | MOS | 27 | 17 | 37 | 53 | 24 | B |
| Synopsys | SNPS | 26 | 20.8 | 98 | 95 | 95 | A |
| Boot Barn Holdings | BOOT | 25 | 23.3 | 68 | 78 | 32 | B |
| ELF Beauty | ELF | 25 | 23.6 | 97 | 98 | 95 | A |
| Taylor Morrison Home | TMHC | 25 | 17.1 | 80 | 75 | 89 | B |
| Epam Systems | EPAM | 24 | 20.6 | 68 | 88 | 32 | B |
| Alphabet | GOOGL | 24 | 22 | 97 | 97 | 92 | A |
| ICL Group | ICL | 24 | 23 | 26 | 45 | 18 | B |
| Perion Network | PERI | 23 | 15.7 | 74 | 99 | 29 | A |
| Commercial Metals | CMC | 22 | 21.8 | 47 | 75 | 24 | C |
| Lennar | LEN | 20 | 17.3 | 86 | 72 | 92 | B |
| Diamondback Energy | FANG | 18 | 16.4 | 81 | 67 | 77 | B |
| Onto Innovation | ONTO | 18 | 12.1 | 77 | 67 | 96 | B |
| Gerdau | GGB | 16 | 20.7 | 56 | 56 | 28 | C |
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, Lululemon and ANET stock earn a very strong 98 Composite Rating. Showing strength after its post-earnings sell-off, Google stock continues to hold an impressive 97 Composite Rating.
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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