Please ensure Javascript is enabled for purposes of website accessibility

5 Stocks on Buffett Watch

By Todd Wenning - Updated Nov 11, 2016 at 6:36PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

These stocks fit the Berkshire Hathaway profile.

Warren Buffett disciples are always wondering which stock the Oracle of Omaha will add to the Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) portfolio next.

Of course, no one knows for sure where he'll place his bets, but we can certainly figure out which stocks out there might "feel at home" in today's Berkshire Hathaway family, based on some key metrics of the current portfolio. According to Capital IQ, these include:

  • A median price-to-earnings ratio of 16.4
  • A median price-to-book ratio of 2.3
  • An average dividend yield of 2.4%
  • An average beta of 0.75

We can further whittle down the list of potential Buffett ideas by eliminating stocks with spotty earnings histories, a new management team, or a complicated business model (or any combination of these). These are situations that the man himself has said he avoids.

So with those things in mind, we'll take a look at five highly rated companies that fit the Berkshire profile and enlist the assistance of 100,000 investors participating in Motley Fool CAPS, as well as the new CAPS stock screener.

Here are a few of the results:

Company

Sector

P/E

Dividend Yield

CAPS Rating (5 max)

American Eagle Outfitters (NYSE: AEO)

Services

10.1

2.2%

****

Bank of Nova Scotia (NYSE: BNS)

Financials

12.8

3.8%

*****

Edison International (NYSE: EIX)

Utilities

15.6

2.4%

****

Genuine Parts (NYSE: GPC)

Services

14.6

3.5%

*****

PPG Industries (NYSE: PPG)

Conglomerates

14.2

3.2%

****

Data provided by Motley Fool CAPS and Yahoo! Finance, as of May 6, 2008.

Not only do these five highly rated stocks meet valuation metrics similar to the current Berkshire portfolio, but also they are proven earnings growers, have CEOs with at least three years on the job, and have easy-to-understand business models. On those grounds, at least, each of these companies wouldn't seem out of place in today's Berkshire portfolio.

So are these potential Buffett picks? Or does some flaw keep them out of contention? Make your voice heard on Motley Fool CAPS today, where 100,000 investors are waiting to see what you have to say.

PPG Industries, Genuine Parts, and Bank of Nova Scotia are Motley Fool Income Investor selections. Berkshire is an Inside Value pick. Berkshire and American Eagle Outfitters are Stock Advisor selections, and The Fool owns shares of Berkshire and American Eagle Outfitters. Try any of our Foolish newsletters today, free for 30 days.

Todd Wenning hustles and flows only when he thinks no one is looking. He does not own shares of any company mentioned. The Fool's disclosure policy is a lyrical lexicon.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.A
$456,500.00 (0.10%) $468.99
Berkshire Hathaway Inc. Stock Quote
Berkshire Hathaway Inc.
BRK.B
$304.05 (-0.03%) $0.10
American Eagle Outfitters, Inc. Stock Quote
American Eagle Outfitters, Inc.
AEO
$13.32 (-0.82%) $0.11
The Bank of Nova Scotia Stock Quote
The Bank of Nova Scotia
BNS
$62.55 (-0.41%) $0.26
Edison International Stock Quote
Edison International
EIX
$65.85 (0.00%) $0.00
PPG Industries, Inc. Stock Quote
PPG Industries, Inc.
PPG
$119.68 (-2.44%) $-2.99
Genuine Parts Company Stock Quote
Genuine Parts Company
GPC
$128.54 (-2.62%) $-3.46

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
330%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/21/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.