Related topics: Warren Buffett, health care, consumer goods, investing strategy, stock market
Warren Buffett seems passé these days. But his strategy of buying companies that are consistently profitable, well-managed and easy to understand holds true.
Credit Suisse analysts set out to design a portfolio for 2011 that would meet Buffett's investment philosophies.
They searched for companies whose profit margins improved the past two years. They sought companies with an above-average return on equity, a measure of how well a company reinvests its earnings. Next, they looked for companies with low debt and a competent management team. Finally, they ensured that none of the companies had any ongoing investigations or accounting issues.
The result? A list of 22 stocks that could satisfy Buffett and deliver solid long-term returns for individual investors. Below are a half-dozen of the companies that made the list.
Some of the companies are well-known, like Boston Beer (SAM, news), the maker of Sam Adams beer. Others are more obscure, including for-profit education company American Public Education (APEI, news) and home health care provider Almost Family (AFAM, news). All offer a record of consistent earnings.
Yet don't expect Buffett to buy these stocks immediately. Some are too small to be purchased by his company, Berkshire Hathaway (BRK.A, news), which has a market value of $200 billion. But they may be in your price range.
Consumer discretionary
Market value: $18.1 billion
Return on equity: 46%
Long-term debt-to-equity ratio: 25%
Total debt: $791 million
CEO tenure: About 4 years
1-year total return: 21%
Why it's notable: TJ Maxx stores have stood out in the recession, as shoppers continue to search for bargains; company earnings have risen for 7 straight quarters.
American Public Education
Market value: $630 million
Return on equity: 33.6%
Long-term debt-to-equity ratio: 0%
Total debt: $0
CEO tenure: 6 years
1-year total return: 9%
Why it's notable: American Public's focus on educating students on active military duty sets it apart from other for-profit educators. Many analysts say this is their top pick in the industry.
