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Kiplinger's Picks Five Stocks "Warren Buffett Would Love"

Tuesday, 24 Jun 2008 | 7:53 AM ET
Billionaire investor Warren Buffett helps Democratic presidential candidate, Sen. Hillary Rodham Clinton, D-N.Y., raise campaign funds in San Francisco, Calif., Tuesday, Dec. 11, 2007. Bufffett, who has said he would be happy with either Clinton or Sen. Barack Obama, D-Ill., as the next president, already helped Clinton raise at least $1 million during a June event in New York. (AP Photo/Paul Sakuma)
Paul Sakuma
Billionaire investor Warren Buffett helps Democratic presidential candidate, Sen. Hillary Rodham Clinton, D-N.Y., raise campaign funds in San Francisco, Calif., Tuesday, Dec. 11, 2007. Bufffett, who has said he would be happy with either Clinton or Sen. Barack Obama, D-Ill., as the next president, already helped Clinton raise at least $1 million during a June event in New York. (AP Photo/Paul Sakuma)

Given Warren Buffett's spectacular success as a stock picker over the years, it's no surprise there are a lot of people who want to follow his lead.

The problem is that Buffett keeps most of his stock picks to himself, for as long as he can.

Berkshire Hathaway does have to release a quarterly snapshot of its U.S. stock portfolio, but the information can be months old.

(Even so, two professors did a study last year indicating you'd still beat the market if you bought what Buffett bought, despite the info lag. See the WBW post Professors Prove Buying What Warren Buffett Buys Will Make You Money.)

While Buffett won't tell you what he's buying, he's very open about what he looks for in a company. On that list: trust-worthy management, solid competitive advantages (such as well-known brand names), and a proven ability to produce strong returns on equity with little debt.

So, armed with knowledge about what he has bought in the past and the factors he likes, Buffett watchers come up with lists of stocks that they think would appeal to him, without knowing whether he's actually buying them or not.

The latest entry, Stocks Buffett Would Love, comes from the July issue of Kiplinger's Personal Finance magazine.

Elizabeth Ody writes that even though "Buffett hasn't asked for our help, we've identified five companies to lighten his pocketbook." They should also "appeal to mortals, too."

They are:

  • Tiffany & Co.
    The jewelry company's famous blue box helps make its branding power "virtually unassailable."

  • Paychex
    The payroll-services company has two Buffett faves: a 'tollbooth' business model and a 'float.' Paychex charges a fee for each payroll check it writes, and it gets investment income from payroll funds for the period between getting the money from its clients and paying it out to the client's employees.

  • Mohawk Industries
    While antitrust laws would probably stop Buffett from buying into this strong competitor in the flooring business to his own Shaw Industries, Mohawk beats Shaw in market share and is "better diversified, with a major presence in every type of flooring."

  • Bed Bath & Beyond
    This retailer's strength lies in its consistent ability to offer a big selection of products in-stock, thanks to excellent inventory management, says Kiplinger's.

  • Fastenal
    Buffett likes "boring-yet-reliable" and it doesn't "get much more boring than nuts and bolts" which is what Fastenal makes. Strong growth and no debt are positives, although the stock is relatively expensive compared to its earnings.
Five for Buffett
A list of less expensive names that might appeal to the Warren Buffett-watching crowd, with Elizabeth Ody, Kiplinger's Personal Finance writer

In an appearance on CNBC's Squawk on the Street, Ody spoke generally about Buffett's investment philosophy and specifically about a few of the stocks she identified as potential Buffett picks. The video clip appears to the left.

Current Berkshire price:

See Warren Buffett Watch on CNBC's The Call, most weekday mornings at 11:50a ET

Questions? Comments? Email me at buffettwatch@cnbc.com

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