A Stock List for Buffet, S&P and Value Line
Business Week recently published an article “Stock Screen: Buy ‘Em Like Buffet“. It presented a list of 49 stocks they screened according to five criteria they report Warren Buffett uses, plus their own criteria to filter out overvalued stocks. The five criteria were:
- Free cash flow of $250 million or more
- Net profit margin of 15% or more.
- Return on equity greater than 15% for each of the past three years and the most recent quarter.
- Shareholder value increasing at least as much as retained earnings over the past five years.
- Liquidity — market capitalization of $500 million or more.
We thought it might be interesting to go a step further and review that list of 49 stocks in terms of the S&P Star ratings for near-term market performance and current fair value. S&P uses a 5 star rating system with 5 being the best.
The following 13 stocks from the list of 49 was rated 4 or 5 by S&P for each of near-term market performance and current fair value:
- Garmin (GRMN)
- Infosys Technologies (INFY)
- Microsoft (MSFT)
- Oracle (ORCL)
- Taiwan Semiconductor (TSM)
- MEMC Electronic Materials (WFR)
- Halliburton (HAL)
- SAP (SAP)
- Satyam Computer Services (SAY)
- Schlumberger (SLB)
- Stryker (SYK)
- Telefonica (TEF)
- Freeport-McMoran (FCX).
Checking that list of 13 stocks against the Value Line rating system for timeliness of investment (1 being best), we found that 6 were highly rated as 1 or 2 for timeliness:
- Infosys Technologies (INFY)
- Oracle (ORCL)
- Halliburton (HAL)
- SAP (SAP)
- Schlumberger (SLB)
- Stryker (SYK).
See our prior article on use of multiple analysis services for stock screening.
Any of the stocks in the list of 49, 13 or 6 could be a good place for do-it-yourself investors to begin their own research into potential opportunities.
Richard Shaw
QVM Group LLC