Build a Warren Buffett portfolio with Stock Screeners

Paradysz Matera
Here are some guidelines if you want to build a stock screening strategy that emulates that of Warren Buffett.

The idea behind the Warren Buffett's Stock Screen is to look for companies with more predictable earnings growth and buy them when they are relatively cheap.

Studies (PDF) - and Buffett's track record, have shown that accurately forecasting EPS growth is a major driver of returns with Growth Investing. The other major factor in successful Growth Investing is Value.

Although Buffett is traditionally associated with Value Investing, his strategy combines both Growth and Value: Buffett would not buy a company with no growth prospect. It is a GARP (Growth At Reasonable Price) strategy.

Investing Universe

In the book Buffettology, the author (ex Buffett's daughter in law) mentions that Warren Buffett prefers to focus on companies that have shown consistent (stable) historical growth because their future EPS growth would then be easier to forecast: you can just extrapolate past growth.

Usually, these companies have a leadership position. Morningstar has a Stock Rating called Economic Moat. Economic Moat seeks companies that have an edge against its competitors and are expected to keep this edge for an extended period. It constitutes an excellent Investing Universe for would be Buffett Investors. Morningstar even uses it in its predefined Warren Buffett screen.

If you don't use Morningstar, you can build yourself a series of test to build a Universe of Market Leaders. Why not use James O'Shaughnessy's Market Leaders ? those companies with above average Market Cap, Revenue, Cash Flow and Shares Outstanding.

In addition, Buffett does not like "commodity" type of Businesses: businesses with lots of competition and therefore low profit margins. So you may add a screening on Profit margin to your Market Leaders stocks.

Alternatively, simply do not use any specific Investing Universe, the primary theme is pretty stringent and few companies will pass a Buffett screen.

Primary Theme Go back to Top

A Key point in Warren Buffett's strategy is “consistent historical Growth" so the following points should be paid attention to:
  • Consistent historical Earning Per Share (EPS) growth over the last 10 years: Buffett does not want companies with volatile earnings.

    For this, you unfortunately cannot use a free stock screener, none of them provides 10 years historical data.

    To check the consistency of a company's EPS growth, a possibility is to export the last 10 years EPS values in a spreadsheet (e.g. Excel) and then check the growth consistency. Unfortunately, although Morningstar Premium Screener allows to screen with past 10 years EPS, you cannot export the values so cannot check EPS consistency in a spreadsheet.

    One of the cheapest option is Stock Prospector (99$ +50$/year membership at the National Association of Investors Corporation NAIC) which allows you to directly screen for EPS consistency over the last 3, 5 or 10 years without the need to export any data to spreadsheet.

    The parameter to use in Stock Prospector is called the R2 EPS for R-Squared of the EPS. The R-Squared checks how far the EPS are from the best growth trend line. The closer to 1 the better, it means the EPS are growing consistently.


    You want an R2 (R-Squared) of at least 0.9 for consistent EPS Growth.

    See the following graph, Stock B (pink) has a higher growth rate than stock A (blue) but its growth is volatile, stock B's R2 is bad at 0.50. Buffett would prefer stock A with a R2 of 0.96: see how the EPS grows consistently.

    Warren Buffet investing with EPS Consistency

    Note: NAIC's Stock Selection Guide closely follows Buffett strategy.


    If you don't want to use Stock Prospector, Morningstar Premium Screener includes a Predefined screen that looks for companies with terrific 10 years track record: that is consistent Sales Growth and positive Earnings in each of the last 10 years. Add a criterion on Economic Moat and there you have a list of companies with great track record and a competitive edge.


    Back to the Primary Theme:

  • Adding a screen on Sales Growth is a good idea because in the long term the best EPS growth comes from Sales Growth, not from cost cutting or other gimmicks.

  • Adding a Cap on Maximum EPS Growth may also be a good idea as it is extremely difficult for a company to grow at excessive rates indefinitely.

Secondary Theme Go back to Top


Adding Quality criteria as Secondary theme is important to ensure future Growth has high chance of materializing. Warren Buffet screens for companies with ROE (Return On Equity) >12% as it is difficult for a company to generate genuine high growth without high ROE.


Value is a major factor in successful Growth Investing. Buffett wants a margin of safety: if growth does not materialize, then the stock would not be punished as severely as if it were fully priced for Growth. In Contrarian Investment Strategies: The next generation, David Dreman found that Value stocks do not get punished in case of profit warning.

You may use various Value measures, for instance:
  • Relative Valuation against a stock’s historical valuation: e.g. compare "Current PE" with "5-10 years Average PE".

  • Discount to Intrinsic Value: Intrinsic value estimate is more accurate for companies with predictable earnings.

  • Price/Earning/Growth (PEG)

Ranking and Holding Period Go back to Top

Few companies should pass a Buffett screen, Ranking is not really required and you may buy all companies that pass. If required, then one of the above Value measures can be used.

Investing "a la Warren Buffett" is a long term strategy and is therefore adapted to long holding periods (≥ 1 year). The addition of Value in the screen provides the necessary margin of safety that long holding period requires.

Sample Warren Buffett Stock Screen Go back to Top

Screening Theme Sample Warren Buffett screen
Investing Universe Economic Moat,
Market Leaders
Primary Theme Consistent EPS Growth (R-squared >0.9),
10% < EPS Growth < 30%
Secondary Theme(s) ROE > 12%,
PE < 5 years Average PE
Ranking PEG Price/Earnings to Growth ratio
Number Of Holdings  
Holding Period ≥ 1 year


Warren Buffett strategy is probably THE best definition of Long Term Growth Investing.

As you can see, it is more complex than simply buying companies with high expected Growth and high Price/Book Value, yet this is the definition of many Growth Indexes !





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