Warren Buffett Watch
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S&P Stock Screen Uncovers "What Buffett Would Buy"
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AP Apple makes iPhones and also makes the list of stocks that fit some of Warren Buffett's investment criteria, as compiled by Standard and Poor's in its twice-yearly stock screen. |
In an article about the screen posted early this morning, Business Week (the magazine is owned by McGraw-Hill, which also owns Standard and Poor's) says S&P Portfolio Services analyst David Braverman compiles a screen that "picks companies using criteria similar to those that fit the legendary investor's growth-oriented style."
The screen looks for:
- Owner earnings (cash flow minus capital expenditures) above $50 million
- Net margins of at least 15% for the past 12 months
- At least 15% return on equity in the previous quarter and in each of the past three years
- Retained earnings that have grown less than market capitalization over five years
- Projected cash flow per share above current stock price over next five years
- Market value at or above $500 million
The criteria are based on Robert Hagstrom's book The Warren Buffett Way: Investment Strategies of the World's Greatest Investor.
As one Business Week reader points out in his on-line comment attached to the article, the screen does not include some important, but hard-to-quantify Buffett requirements, like trust-worthy, competent management and 'durable competitive advantage.' (During a video tour of his Omaha headquarters last November, Buffett showed our Becky Quick a particularly telling example of Why 'Durable Competitive Advantage' Matters.)
With that caveat, here are the results of the S&P "Buffett" screen as listed by Business Week. It notes "the presence of a number of European and Asian names" including China Mobile, the company with the largest market value in the list. (Remember that during his October trip to Asia, Buffett wasn't too enthusiastic about Chinese stocks because the market had been "too hot."
- 3M
[MMM Loading... ()
] - Alcon
[ACL Loading... ()] - Altera
[ALTR Loading... ()] - Altria Group
[MO Loading... ()] - Aluminum Corp. of China
[ACH Loading... ()] - America Movil
[AMX Loading... ()] - Apollo Group
[APOL Loading... ()] - Apple
[AAPL Loading... ()] - Aracruz Celulose
[ARA Loading... ()] - Autodesk
[ADSK Loading... ()] - Bard (C.R.)
[BCR Loading... ()] - Becton Dickinson
[BDX Loading... ()] - BG Group
[BRGYY Loading... ()] - British American Tobacco
[BTI Loading... ()] - Brown-Forman
[BFB Loading... ()] - China Mobile
[CHL Loading... ()] - Cisco Systems
[CSCO Loading... ()] - Coach
[COH Loading... ()] - Coca-Cola
[KO Loading... ()] - Diageo
[DEO Loading... ()] - Equifax
[EFX Loading... ()] - Franklin Resources
[BEN Loading... ()] - Freeport-McMoRan Copper
[FCX Loading... ()] - Garmin
[GRMN Loading... ()] - GlaxoSmithKline
[GSK Loading... ()] - Grupo Televisa
[TV Loading... ()] - Infosys Technologies
[INFY Loading... ()] - Intl. Game Technology
[IGT Loading... ()] - Johnson & Johnson
[JNJ Loading... ()] - Microsoft
[MSFT Loading... ()] - Mobile Telesystems
[MBT Loading... ()] - National Semiconductor
[NSM Loading... ()] - Novo-Nordisk
[NVO Loading... ()] - Occidental Petroleum
[OXY Loading... ()] - Oracle
[ORCL Loading... ()] - Overseas Shipholding Group
[OSG Loading... ()] - Paychex
[PAYX Loading... ()] - PepsiCo
[PEP Loading... ()] - Philippine Long Distance
[PHI Loading... ()] - Portugal Telecom
[PT Loading... ()] - Price (T. Rowe) Group
[TROW Loading... ()] - Qualcomm
[QCOM Loading... ()] - Qwest Communications
[Q Loading... ()] - Rio Tinto Group
[RTP Loading... ()] - Roche Holdings
[RHHBY Loading... ()] - Rockwell Automation
[ROK Loading... ()] - SAP
[SAP Loading... ()] - Sasol
[SSL Loading... ()] - Schlumberger
[SLB Loading... ()] - Sigma-Aldrich
[SIAL Loading... ()] - Stryker
[SYK Loading... ()] - Swisscom
[SCMWY Loading... ()] - Taiwan Semiconductor
[TSM Loading... ()] - TD AmeriTrade
[AMTD Loading... ()] - Telefonica
[TEF Loading... ()] - Telefonos De Mexico
[TMX Loading... ()] - Turkcell
[TKC Loading... ()] - Vimpel Communications
[VIP Loading... ()] - Votorantim Celulose
[VCP Loading... ()] - Wipro
[WIT Loading... ()]
To me, the list looks a bit heavy on the tech names to really fit Buffett's style. But whether Warren would actually buy Apple or not, the screen does pretty well. Business Week says from 1995 through last month, the stocks selected twice a year by the screen were up almost 15 percent a year. That's almost double the S&P's annualized return of just over 8 percent.
Final disclaimer from Biz Week: "It should be noted that these are not necessarily stocks that Buffett has bought or personally plans to buy. The list reflects only the criteria that Buffett has emphasized in the past."
Berkshire's current price: [US;BRK.A
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