Warren Buffett Is a Growth Investor

Berkshire Hathaway's Warren Buffett is a value investor, right? Everyone knows that!

Well don't tell that to Gerald Martin and John Puthenpurackal of American University and UNLV. In 2008, the two completed what they call "the first rigorous examination of Berkshire Hathaway's investment performance" -- a paper that not only analyzed the superior investment performance of Buffett, but also looked at his investing style.

Besides concluding that Buffett's superior investment returns since 1976 were more than just luck -- as if we didn't know that already! -- Martin and Puthenpurackal concluded that Warren Buffett is ... wait for it ... a large-cap growth investor.

The definition of growth that the researchers used was one that separates value and growth stocks based on the inverse of book value multiples and classifies value stocks as those with the highest book-to-market ratio and pegs those with the lowest as growth stocks. According to the paper, growth stocks accounted for more than 40% of Berkshire's investments, while true value picks made up less than 20% of Buffett's buys.

But let's not get too crazy here. After all, Buffett is still very much a value investor by his own definition -- that is, he only buys stocks that offer a discount to the company's intrinsic value. But what this study does suggest is that if we're looking for Buffett-esque stocks, our best bet is to look for high-quality companies rather than rummage through the bargain bin.

To track down stocks that might fit the bill, I've enlisted the help of The Motley Fool's CAPS community and its stock screener. I focused my search on stocks that are returning 10% or more on their equity, are trading above book value, and have been highly rated by the CAPS community members. (You can run the same screen by clicking here).

Source: CAPS as of Aug. 5, 2009.
TTM = trailing 12 months.

While these aren't meant to be formal recommendations, they're a great place to kick off some research. Why don't we start by taking a closer look at StatoilHydro.

The anatomy of a growth stock
Whether you're talking about ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX), or StatoilHydro, the primary reason to be interested in one of these oil and gas giants is because of a bullish view on the long-term potential for oil and gas prices. Quite simply, if oil prices boom in the years to come, it's going to be tough for these companies to do too poorly.

Of course, while "not doing too poorly" may be a relatively comforting downside, we want to find companies that are actually going to grow and prosper. Based on comments from its second-quarter report, it looks like that is exactly what StatoilHydro plans to do.

Though profits declined from the prior year thanks to the big decline in the price of oil, the company has continued to be aggressive about developing new projects and drilling exploratory wells. Management noted that 50% of the planned $13.5 billion in 2009 capital spending will be directed toward growth projects, and the company expects that it will grow production at an average rate of 4.1% per year between 2009 and 2012.

CAPS or bust
CAPS members have anointed StatoilHydro's stock a five-star pick, with 866 outperform ratings against just 20 underperforms.

CAPS All-Star randomvariable, one of the many StatoilHydro bulls, kept it nice and simple when giving the stock a thumbs-up in April:

Good P/E, Not profitable last quarter of '08, but they look like a solid, cheap oil play that could beat the market when things recover. Oil prices will certainly be going up in the near future.

But here's the real question: What do you think of StatoilHydro's prospects? Click over to the CAPS community and share your opinion with the 135,000 investors already participating.

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