Pankaj Patel, managing director of Credit Suisse (NYSE:CS) and global head of quantitative research, has compiled a list of stocks based on the following Warren Buffett inspired criteria.
Return on equity greater than 15%
Debt to equity ratio less than 50%
Steady or improving net and gross margins over the past two or three years
Proprietary valuation model that predicts at least a 10% upside
No SEC inquiries or accounting issues
Not involved in a merger or acquisition
Credit Suisse also performed historical testing using this criteria. Since 2002, the Buffett inspired portfolio has outperformed the S&P 500 (NYSEARCA:SPY) every year except one, 2008. The outperformance has ranged from 2% to 21%.
The screen returned the following 14 stocks, which Mr. Patel believes will do well in 2012, even in a poor economy. Two of the stocks are already owned by Berkshire Hathaway (NYSE:BRKA):
Polaris Industries, Inc. (NYSE:PII) The company engineers and manufactures snowmobiles, all-terrain vehicles, motorcycles, and utility vehicles. Shares up 46% year-to-date.
iRobot Corporation (NASDAQ:IRBT) iRobot designs and builds robots that make a difference in people’s lives. It’s cleaning robots provide faster, smarter ways to get dirty jobs done. Shares are up 14% year-to-date.
Herbalife Ltd. (NYSE:HLF) This stock pick is a global nutrition and weight management company that sells products over the world through 2.3 million independent distributors. Shares are up more than 50% year-to-date.
Darling International Inc. (NYSE:DAR) Although shares are flat, Darling International is the only publicly-traded rendering company, leading the country in providing fat and bone rendering, providing recycling and recovery solutions to the nation’s food industry.
Exxon Mobil (NYSE:XOM) This oil giant is the world’s largest publicly international oil and gas company. As of the end of September, Buffett held 421,800 shares. Shares have gained nearly 3% this year.
Chevron (NYSE:CVX) Shares of this oil play have gained about 4% this year. Chevron has major operations in the world’s most important oil and gas regions.
Franklin Resources (NYSE:BEN) A global investment management organization known as Franklin Templeton Investments. The firm has an extensive global presence, including offices in over 30 countries. Shares have declined nearly 17% year-to-date.
T. Rowe Price (NASDAQ:TROW) Another global investment management firm dedicated helping clients achieve long-term success. Shares are down almost 23% this year.
MWI Veterinary Supply, Inc. (NASDAQ:MWIV) Supply company for veterinarians in the United States, including products, management tips, and company information. Shares are flat for the year.
Hi Tech Pharmacal Co. Inc. (NASDAQ:HITK) A specialty pharmaceutical company that develops , manufactures, and markets generic and branded prescription and OTC products. Shares are up 54% year-to-date.
General Dynamics Corp. (NYSE:GD) Defense industry contractor for shipbuilding and marine systems, defense systems, land and amphibious combat systems and munitions. As of the end of September, Buffett actually reported a new 3.1 million share position in the company. Shares are down 14% this year.
Illinois Tool Works Inc. (NYSE:ITW) A diversified manufacturer of engineered products and specialty systems. The global industrial company leads commercial innovation. Shares have fallen 20% year-to-date.
NetApp, Inc. (NASDAQ:NTAP) Provides an integrated solution that enables storage, delivery, and management of network data and content to achieve business goals for clients. Shares have declined nearly 40% this year.
Altera Corp. (NASDAQ:ALTR) A Silicon Valley manufacturer of programmable logic devices. The company was founded in 1983 and is headquartered in San Jose, California. Shares have edged 2% lower for the year.