Buy like Buffett: These stocks have similar qualities as the insurance name Berkshire just bought

Published Mon, Mar 21 202212:59 PM EDTUpdated Mon, Mar 21 20221:37 PM EDT

Warren Buffett just bought insurer Alleghany in his biggest deal in six years. For those aspiring to be a great value investor like Buffett, here are some stocks with similar characteristics as the one the "Oracle of Omaha" just purchased. Berkshire Hathaway announced its plan to acquire Alleghany for $11.6 billion , or $848.02 per share, in cash. The Omaha, Nebraska-based conglomerate said the deal represents a multiple of 1.26 times Alleghany's book value at the end of last year. To search for stocks with similar features as Alleghany, we looked at companies with comparable consistent and strong earnings growth, a quality that Buffett prioritizes when picking stocks. Meanwhile, we also screened stocks with a low debt-to-equity ratio as Buffett usually prefers to see a small amount of debt so that earnings growth is being generated from shareholders' equity as opposed to borrowed money. "It's the future that counts," Buffett said at a shareholder meeting in 1995. "We want to be in the business that 10 years from now is earning a whole lot more money than it is now, and that we will still feel good about the prospects of the business at that time." Furthermore, we aimed to find stocks trading at a similar multiple as Alleghany based on price-to-book ratios, the metric Berkshire mentioned in the press release of this deal. Here are all the criteria taken into consideration: Strong long-term earnings growth — five-year EPS growth of 15% annually Low debt — less than 35% debt-to-capital ratio Low price-to-book ratio — less than 1.1 Market cap above $5 billion in the S & P 1500 universe Above are the stocks with similar characters as Alleghany. These aren't necessarily names we believe Buffett would buy, especially given how much his dealmaking has slowed lately. But, if he's finally starting to deploy his $146 billion cash hoard , these names could catch his eye. The screen turned up some other insurers with strong earnings growth, low debt levels as well as relatively low multiples — MetLife and Old Republic International . Several financial names also made the list, including Citigroup, Citizens Financial Group , Capital One Financial and Jefferies Financial Group . Buffett has been a longtime investor in big banks with Bank of America being one of his biggest equity positions for many years. Real estate investment trust company SL Green Realty was also on the list.

Warren Buffett at Berkshire Hathaway's annual meeting in Los Angeles, California. May 1, 2021.

Gerard Miller | CNBC