Stocks That Pass the Warren Buffett Buy Test

Stocks that fit the Warren Buffett mode.

Investors who have emulated Warren Buffett by copying the Berkshire Hathaway (ticker: BRK.A, BRK.B) portfolio have generated some impressive returns over the years. In the past 20 years, BRK.B stock has nearly tripled the return of the S&P 500 index. The only thing better than following in Buffett’s footsteps is beating him to the punch. Morningstar recently compiled a list of stocks that encompass the major traits Buffett likes in an investment, including strong competitive advantages, positive free cash flow, compelling valuations and solid returns on capital. Here are nine stocks that fit the Buffett mold.

A sign for biotechnology company, Biogen, Inc. is seen on a building in Cambridge, Massachusetts, on March 18, 2017.
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Biogen (BIIB)

Biogen is a biotechnology company that develops and produces treatments for multiple sclerosis, cancer and inflammatory diseases. Analyst Karen Anderson says Biogen’s portfolio of specialty-market drugs and its pipeline focused on neurology are unique among its competitors and create the type of competitive moat that Buffett loves in a stock. Anderson is projecting $10 billion in amyloid antibody sales for Biogen by 2027, but says the stock has significant upside even if neither of its amyloid antibodies are approved by the Food and Drug Administration. Morningstar has an “undervalued” rating and $420 fair value estimate for BIIB stock.

LONDON, ENGLAND - JANUARY 26: A general view of the UK headquarters of BlackRock on January 26, 2017 in London, England. Former British Chancellor George Osborne is to work part-time as an advisor at global investment management firm BlackRock.
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BlackRock (BLK)

BlackRock is the largest global asset management company, controlling more than $5 trillion in assets, including its popular iShares family of exchange-traded funds. Any Buffett follower is familiar with his affinity for financial-sector stocks. Analyst Greggory Warren says money that flows into asset management firms tends not to leave, suggesting BlackRock has a competitive advantage over its peers given its leadership position. Warren says BlackRock has both active and passive offerings, a large base of institutional clients, a valuable brand and competitive fees. Morningstar has an “undervalued” rating and $500 fair value estimate for BLK stock.

NEW YORK, NY - DECEMBER 14: The Disney logo is displayed outside the Disney Store in Times Square, December 14, 2017 in New York City. The Walt Disney Company announced on Thursday morning that it had reached a deal to purchase most of the assets of 21st Century Fox. The deal has a total value of around $66 billion, with Disney assuming $13.7 billion of Fox's net debt.
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Walt Disney Co. (DIS)

Disney is one of the largest diversified media companies in the world, and its recent acquisition of Twenty-First Century Fox (FOXA) and expansion into streaming video means it will be getting even bigger in the next couple of years. Analyst Neil Macker says the integration of Fox’s assets and the 2019 launch of streaming service Disney+ will create value for Disney investors and eliminate uncertainty that has been weighing on the stock. Morningstar has a “fairly valued” rating and $130 fair value estimate for DIS stock.