The CAPS Screen: 5 Rising Warren Buffett Stocks
By
Ilan Moscovitz
July 24, 2008
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If you could earn an obscene 50% annual return on your money, you could turn $10,000 into $1 million in just over eleven years. Poppycock? Well, Buffett once famously boasted he could do it-- provided he had less money.
That’s because his $35 billion cash hoard limits his options to a small number of large companies, like brewing giant Anheuser-Busch (NYSE: BUD) and consumer-goods conglomerate Procter & Gamble (NYSE: PG). Of the nearly 6,700 companies traded on major U.S. exchanges, only about 475 of them are valued at more than $10 billion. If Buffett tried to purchase shares of one of the smaller companies, his own buying would drive up the share price beyond what he’d like to pay.
But since we don’t share Buffett’s restrictions, I used our new CAPS screening tool to apply Buffett’s investing strategy to small- and mid-cap stocks. We're looking for companies whose strong profitability and growth indicates the presence of an economic moat. Below are five companies with returns on equity above 15%.
They also have:
- Market caps between $600 million and $2 billion.
- Trailing three-year EPS growth rate over 10%.
- Price-to-earnings multiple below 20.
- Five-star ratings, the highest possible, from our CAPS community.
Remember, in the first year for which we have data, five-star companies outperformed with an average gain of 28%.
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Company
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Share Price
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Sector
|
Market Cap
|
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Chicago Bridge & Iron (NYSE: CBI)
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$33.02
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Industrial Goods
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$3.2 billion
|
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Manitowoc (NYSE: MTW)
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$28.37
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Industrial Goods
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$3.7 billion
|
|
Middleby (Nasdaq: MIDD)
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$49.99
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Industrial Goods
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$848 million
|
|
Grey Wolf (AMEX: GW)
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$8.84
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Basic Materials
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$1.6 billion
|
|
Terex (NYSE: TEX)
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$50.12
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Industrial Goods
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$5.1 billion
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Data from Motley Fool CAPS and Yahoo! Finance as of July 23.
Of course, finding great stocks doesn’t end with just a screen. A little due diligence will go a long way in your quest to be better than Buffett. Come and join us on Motley Fool CAPS to let the collective wisdom of our 110,000-strong CAPS community help you make your investment decisions.
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