The CAPS Screen: 5 Warren Buffett Stocks on the Rise

If you could earn an obscene 50% annual return on your money, you could turn $10,000 into $1 million in just over 11 years. Poppycock? Well, Warren 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 few large companies, like multinational banker Wells Fargo (NYSE: WFC  ) and retail giant Wal-Mart (NYSE: WMT  ) . Of the nearly 6,700 companies traded on major U.S. exchanges, only about 470 of them are valued at more than $10 billion. If Buffett tried to purchase shares of one of the smaller companies, his own buying could drive up the share price beyond what he’d like to pay.

But since we don’t share Buffett’s restriction, 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 indicate the presence of a big economic moat. Below are five companies with returns on equity above 15%.

They also have:

  • Market caps between $600 million and $5 billion.
  • Trailing-three-year EPS growth rate above 10%.
  • Price-to-earnings multiple below 20.
  • Five-star ratings, the highest possible, from our CAPS community.

Since we began tracking the collective intelligence of our CAPS investment community in November 2006, five-star companies have outperformed, with an average annualized gain of more than 12%.

Company

Sector

Price-to-Earnings

3-Year EPS Growth

Return on Equity

Atwood Oceanics (NYSE: ATW  )

Basic Materials

15.4

82%

24%

Tata Motors (NYSE: TTM  )

Consumer Goods

9.1

23%

20%

Terex (NYSE: TEX  )

Industrial Goods

7.3

37%

27%

Titanium Metals (NYSE: TIE  )

Basic Materials

10.1

18%

17%

Unit (NYSE: UNT  )

Basic Materials

9.3

20%

20%

Data from Motley Fool CAPS as of Aug. 17, 2008.

Of course, finding great stocks doesn’t end with running a screen. A little due diligence will go a long way in your quest to be better than Buffett.

So come and join us on Motley Fool CAPS to let the collective wisdom of our 115,000-strong (and growing!) CAPS community help you make your investment decisions.

Related Foolishness:

Ilan Moscovitz doesn’t own shares of any companies mentioned in this article. He likes small-cap stocks and small furry animals. Atwood Oceanics and Unit are Stock Advisor recommendations. Tata Motors is a Global Gains pick. Wal-Mart is an Inside Value selection. The Fool owns shares of Terex. The Motley Fool's disclosure policy has a soft spot for sugar gliders.


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Related Tickers

12/19/2014 4:09 PM
ATW $30.46 Up +2.03 +7.14%
Atwood Oceanics CAPS Rating: *****
TEX $27.97 Up +0.95 +3.52%
Terex CAPS Rating: ***
TIE.DL $16.50 Down +0.00 +0.00%
Titanium Metals CAPS Rating: *****
TTM $41.39 Down -0.61 -1.45%
Tata Motors CAPS Rating: ****
UNT $37.25 Up +2.39 +6.86%
Unit Corp. CAPS Rating: ****
WFC $54.45 Down -0.76 -1.38%
Wells Fargo CAPS Rating: ****
WMT $85.16 Down -0.78 -0.91%
Wal-Mart Stores CAPS Rating: ***

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