Six Buffett-Style Stocks to Invest

May.22, 2008 in Market Outlook

Balchem (nasdaq: BCPC - news - people ): New York state-based firm makes specialty performance ingredients and products for the food, nutritional, pharmaceutical and medical sterilization industries, with end-users including both humans and animals. The small-cap ($432 million) has increased earnings in nine of past 10 years, has a 10-year average return on retained earnings of 17.7% and has enough annual earnings ($17.5 million) to pay off its debt ($15.2 million) in less than a year.

Thor Industries (nyse: THO - news - people ): Mobile home stalwart has no debt and has earned shareholders a 17.1% return on retained earnings over the past decade. Insiders at the Ohio-based company also have been buying back shares over past five years, another attribute Buffett likes.

Hansen Natural (nasdaq: HANS - news - people ): California-based specialty beverage maker’s products include natural sodas, fruit juices, teas, smoothies and several energy drinks, including Monster Energy. The $2.7-billion-market-cap firm has no long-term debt and an impressive average three-year ROE of 39.6%–and an equally impressive 40.2% return on retained earnings over last decade.

Cascade Bancorp (nasdaq: CACB - news - people ): Over the past 10 years, Oregon-based community bank has average ROE of 19.1% and 15.5% return on retained earnings, indicating management is doing good job. Small-cap ($247 million) had a dip in earnings in 2007 for the first time in 10 years, which this model sees more as a buying opportunity than a problem.

Brown & Brown (nyse: BRO - news - people ): Florida-based insurance intermediary ($2.7 billion market cap) has grown EPS in each year of past decade while producing 23% ROE in that time. Firm also has generated 19.6% return on retained earnings over the past 10 years.

All of these firms are probably too small in size to be considered suitable for actual investment by Buffett’s mammoth Berkshire Hathaway. But with their stable earnings growth, strong management and manageable debt, each has the type of track record and balance sheet that Buffett sought out while amassing his and Berkshire’s fortunes. If you’re looking for some solid stocks with good long-term prospects, you’d be wise to consider any of these.

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