Screening for Warren Buffett Stocks
(0:45) - Stock Guru Stock Screening : Investing Like A Professional
(4:30) - Warren Buffett Stocks To Keep On Your Radar: Tracey’s Top Stock Picks
(16:45) - Episode Roundup: PRDO, RELL, KBH
Podcast@Zacks.com
Welcome to Episode #343 of the Value Investor Podcast.
Every week, Tracey Ryniec, the editor of Zacks Value Investor portfolio, shares some of her top value investing tips and stock picks.
This week, Tracey shifted gears away from the Zacks.com screening tools, to use the more sophisticated Zacks Research Wizard screens covering numerous stock investing gurus.
Who wouldn’t want to invest “like” Warren Buffett, Joel Greenblatt or Peter Lynch?
For value investors, investing like Warren Buffett is the holy grail. We know what fundamentals make up a “Buffett-like” stock. Zacks created a Guru Screen to encapsulate those fundamentals.
Screening for Warren Buffett Stocks
Finding Buffett-like stocks isn’t simple. It’s not just a low P/E ratio and good free cash flow. The Zacks guru screen for Buffett stocks includes the Return on Equity (ROE), Cash flow/Equity and the P/B ratio.
Like the Benjamin Graham guru screen, the Zacks Rank is NOT a component of the screen. Why is it excluded?
The Zacks Rank is a short-term recommendation of 1 to 3 months. Both Buffett and Graham were long-term investors. Including the Rank would likely exclude some companies that, over the longer term, met all of the value fundamentals both of them looked for.
This screen returned only 3 stocks, out of thousands of possibilities.
3 Buffett-Like Stocks for Your Watch List
1. Perdoceo Education Corp. (PRDO)
Perdoceo Education is an online and campus-based adult education company. It operates Colorado Technical University and American Intercontinental University Program. Perdoceo offers associates through doctoral degrees.
Recently, Perdoceo declared its inaugural dividend, which is currently yielding 2.6%. Year-to-date Perdoceo shares are up 21.3% but it’s still cheap on a P/E and PEG ratio metric. It has a forward P/E of just 8.9 and a PEG of 0.6. A PEG ratio under 1.0 means it has both growth and value.
Should Perdoceo Education be on your watch list?
2. KB Home (KBH)
KB Home is a national home builder with a market cap of $4 billion. KB Home was also on a recent Benjamin Graham stock screen.
Earnings for KB Home are expected to fall 31% in fiscal 2023 but rebound 9% in fiscal 2024.
KB Home shares are up 54.5% year-to-date but it remains a deep value stock with a forward P/E of 7.9. It also pays a dividend currently yielding 1.6%. Berkshire Hathaway recently bought 3 home builder stocks: DR Horton, Lennar, NVR Inc.
Should value investors be considering KB Home in 2023?
3. Richardson Electronics, Ltd. (RELL)
Richardson Electronics is a distributor and global provider of engineered solutions for green energy, power management, custom display and healthcare markets. It’s a micro-cap company with a market cap of just $169.7 million.
Buffett loves companies with a long history because that usually indicates it has some kind of a moat. Richardson Electronics has been in business for 75 years.
Shares of Richardson Electronics are down 44.6% year-to-date but it’s attractively valued, with PEG ratio of just 0.6.
Richardson Electronics has a strong balance sheet. At the end of Fiscal Year 2023 fourth quarter, it had cash and cash equivalents of $25 million and no debt. It pays a dividend, currently yielding 2.1%.
Should Richardson Electronics be on your watch list?
What Else Do You Need to Know About Screening for Warren Buffett Stocks?
Tune into this week’s podcast to find out.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
KB Home (KBH) : Free Stock Analysis Report
Richardson Electronics, Ltd. (RELL) : Free Stock Analysis Report
Perdoceo Education Corporation (PRDO) : Free Stock Analysis Report
