• 3 Stocks on Buffett's Wish List?
• Make Millions From Thousands
• The Buying Opportunity You Won't Want to Miss
• The Stock Screaming "Buy Me!"

3 Stocks on Buffett's Wish List?

"A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread."
-- Warren Buffett, Oct. 16, 2008

It was a tough year for the world's richest man -- according to data from Forbes, Warren Buffett's net worth declined in value by a staggering $25 billion in 2008.

So let's not be too hard on ourselves if we, too, owned a few stocks that lost substantial portions of their value last year. Instead, let's pay close attention to what masters like Buffett are doing on the heels of such a dismal market year.

Let's cut to the chase
Buffett has been using the $44 billion cash hoard he had at the end of 2007 to buy stocks ... in the midst of an economic crisis.

Sure, Buffett may be insane, but as the world's richest man, his record speaks for itself. So when he wrote in that October New York Timeseditorial that he's buying now because it is likely that "the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up," Fools would do well to take heed.

These opportunities
What opportunities might the Oracle see today? According his most recent 10-K filing, Buffett’s interested in buying companies at a fair price that have:

These criteria are designed to ensure that the stocks on Buffett's watch list are large, well-run, and understandable, and that they possess durable moats-- sustainable competitive advantages that allow a company to maintain high levels of profitability and growth over long periods of time. Those are the rare companies that you want to buy when they're cheap, then hold for a long time as they continue to grow and prosper.

To try to identify the stocks that may be populating Buffett's wish list, I built a screen based on these traits using Capital IQ, an institutional software database. My research turned up 47 stocks. Confirming that we're on the right track, several of the companies that popped up -- Coca-Cola (NYSE: KO) and Procter & Gamble (NYSE: PG) are two standouts -- are alreadyowned by Buffett.

Here are three more candidates:

Company

7-Year Annual Earnings Growth

Return on Equity

CEO Tenure

Industry

Analyst Coverage

3M (NYSE: MMM)

6%

23%

4 Years

Conglomerates

21

Honeywell (NYSE: HON)

7%

23%

8 Years

Aerospace & Defense

27

Noble (NYSE: NE)

33%

29%

2 Years

Oil & Gas Drilling

43

Data from Capital IQ, a division of Standard & Poor's.

But you can do better
Unfortunately, large companies attract lots of coverage from Wall Street analysts -- those 47 stocks have 24 analysts following them, on average -- which, as I've explained in an earlier column, makes them less likely to be mispriced. Even though Buffett's excited about all the opportunities he sees today, he's well aware that small companies offer greater upside.

So given that $45 billion American Express (NYSE: AXP) is on the smallerend of Buffett's major holdings, why does he stick with such large stocks?

Buffett’s overall portfolio was more than $112 billion at last count, which means that any new investments Buffett makes will have to be big -- such as his recently announced acquisition of Burlington Northern -- to have much of an impact on his bottom line. Only huge companies can support the kind of volume he brings to the table. So he has to look for the market's best large caps, rather than the market's best stocks.

He freely acknowledges this fact: 

[Our] past record can't be duplicated or even approached. Our base of assets and earnings is now far too large for us to make outsized gains in the future[original emphasis] .

Cue our sympathetic "aww" ...

Why Buffett may wish he had less money
Buffett once famously boasted that he would be able to earn 50% annual returns... but only if he had a whole lot lessmoney. Why? Because he'd be able to freely buy and sell small stocks that the hot shots on Wall Street don't adequately cover.

So if you're like me and have less than $95 billion to invest, it makes sense for you to look at some of the stocks the Oracle wishes he could buy -- small stocks.

If we strip away Buffett's $75 million pre-tax earnings requirement and focus on small caps, our list of candidates grows to 76. Better still, these companies have just eight analysts covering them on average, which increases our chances that Wall Street's missing something.

Here are three small-cap stocks that Buffett may wish he could buy.

Company

7-Year Annual Earnings Growth

Return on Equity

CEO Tenure

Industry

Analyst Coverage

EZCORP

89%

20%

10 Years

Pawn Shops and Consumer Finance

6

Graham

32%

20%

3 Years

Industrial Machinery

3

WD-40 (Nasdaq: WDFC)

1%

16%

12 Years

Household Products

0

*Data from Capital IQ, a division of Standard & Poor's.

Of course, these aren't my (or Buffett's) official recommendations. But they share the most important qualities he says he screens for, and they are interesting places for further research.

Some more ideas
Yes, it's been a tough time for all of us. But the world's richest man -- who has made bundles of money through wars, oil shocks, recessions, and a number of market panics and sell-offs -- believes that now is the time to invest and make money: "If you wait for the robins, spring will be over."

Our team at Motley Fool Hidden Gems agrees with Buffett. It's astounded by some of the small-cap bargains around today. If you're looking for some ideas, click hereto read about its favorite stocks, free for the next 30 days.

Already aHidden Gems subscriber? Log in at the top of this page .

This article was originally published on March 19, 2009. It has been updated.

Ilan Moscovitz wishes he could own small, cute, furry animals, but life is never that simple. He doesn’t own shares of any company mentioned. Coca-Cola, 3M, and American Express areInside Value selections. Coca-Cola and Procter & Gamble areIncome Investor picks.  The Motley Fool owns shares of Procter & Gamble. The Fool's disclosure policy has a soft spot for sugar gliders .

This article was originally published as 3 Stocks on Buffett's Wish List?on Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

Make Millions From Thousands

I  couldwrite this article the usual way -- by showing you how to turn your thousands into millions through investments in solid, well-known companies. Adobe , for example, has grown by a compound average of 20% annually over the past 20 years, while Amgen (Nasdaq: AMGN) has averaged close to 21%. Not too shabby.

But can such returns turn your thousands into millions? Yes, eventually. A single investment of merely $10,000 would turn into $1 million in around 26 years if it grew at an annual average of 20%. But that's a fairly steep rate to count on for your stock investments -- a number to which only a select few master investors can aspire. It's safer to have more conservative expectations -- perhaps closer to 10%, the stock market's historical average annual return over most of the past century.

A fine balance
So what should you do if you don't want to wait 50 or more years to make millions? Here's one option: Take a few chances.

With most of your money, you shouldn't take crazy risks. Consider socking much of it away in a broad-market index fund, such as the Vanguard 500 Index (VFINX). That low-cost fund should earn you close to the market's historical return over long periods of time. You might also try S&P 500 Depositary Receipts , an exchange-traded fund also known as SPDRs. Either of these options will instantly invest your money in 500 major American companies, such as Hewlett-Packard (NYSE: HPQ), Legg Mason (NYSE: LM), and Texas Instruments (NYSE: TXN).

But once you've done that, take a few chances and supplement your index with growth-stock picks. That's what I'm doing in my own investment account. I don't want all of my money in an index fund, because I'd like my portfolio to grow faster than average. Instead, a chunk of my nest egg sits in a variety of individual stocks.

This strategy should help moderate volatility, and it can also allow you to do well with carefully chosen stocks. It definitely aided me in turning $3,000 into $210,000. (It can also help you zero in on great stocks the Street misses.) If you don't believe me, read fellow Fool Paul Elliott's account of how one stock can change everything. He describes how $1,800, the cost of a fancy TV, can turn into $190,000, the value of an entire home -- provided you break some rules.

Aiming for the stars
Such returns, which come from classic Rule Breaking companies, are too tempting for me to ignore. That's why I'm still on the lookout for young, dynamic companies that are breaking the rules as they grow and prosper.

The kinds of companies I'm talking about are tomorrow's Home Depot (NYSE: HD), Dell (Nasdaq: DELL), and Oracle . Think about how different the world was before them. For home improvement projects, we used to have to go to lots of separate stores for lumber, plumbing, and other supplies. We had to accept whatever computers were available, without being able to customize them to our preferred specifications. Big companies today would have trouble imagining life without massive databases. These are all companies that broke their industries' molds and introduced newer, better systems.

Even Ford (NYSE: F) was a Rule Breaking company once, too, daring to make a luxury item available to the masses at an affordable price. Just try to imagine a world without cars.

Find a few rockets
Seeking out and investing in Rule Breakers requires patience and entails risk. However, just one growth rocket has the potential to supercharge an otherwise stodgy index strategy.

If you're interested in adding some turbo-boosters to your own portfolio, consider our Motley Fool Rule Breakers service. You can try it free for 30 days, including full access to all past issues and every previous recommendation. Headed by Fool co-founder David Gardner, Rule Breakerspays special attention to cutting-edge fields such as biotech, alternative energy, and nanotechnology. Check it outto learn more.

This article was originally published on July 7, 2006. It has been updated.

Longtime Fool contributor Selena Maranjian owns shares of an S&P 500 index fund, Home Depot, and Amgen. Adobe Systems is aMotley Fool Stock Advisor recommendation. Dell and The Home Depot areMotley Fool Inside Value recommendations. Oracle is aMotley Fool Pro holding. The Fool owns shares of Legg Mason. The Fool is investors writing for investors.

This article was originally published as Make Millions From Thousandson Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

The Buying Opportunity You Won't Want to Miss

It didn't happen exactly as I had predicted, but it has finally happened. And it means that the world's fastest-growing stocksare cheaper now than before.

Before I get to the whos, whys, and wheres, though, let me tell you whom we have to thank.

Here comes the cabal
Although owners of popularly shorted stocks such as Gannett (NYSE: GCI), Ambac (NYSE: ABK), and Las Vegas Sands (NYSE: LVS) may disagree with me, short-sellers are crucial to healthy markets.

By making the case for stocks to fall, short sellers make the market more efficient. Shorts temper excessive optimism and help us all avoid the protracted painful corrections that are its consequence.

Where shorts didn't tread
Optimism, however, had been the defining characteristic of Chinese markets until 2008. Chinese stocks gained 130% in 2006 and another 97% in 2007. As a result, money moved into these markets at a remarkable clip, and stories aboundedabout Chinese housewives, cabdrivers, and fishmongers speculating in the market.

Of course, there was nothing to stop them.

See, you couldn't short stocks in China. Without investors scouring the market for weaknesses, those same housewives, cabdrivers, and fishmongers have been treated to nothing but good news. That made them overconfident, overzealous, and then overexposed to an unquestionably richly valued basket of stocks.

It won't be that way for long ...
China's Security Regulatory Commission, fearing a stock market crash, was reluctant to stop them. That's why the country held off for so long on allowing investors to short stocks.

But it had become so bad in China last year that the CSRC finally approved shorting at the end of September. To me, this indicates that the CSRC believed all optimism had been purged from the marketplace. When that happens, we've reached the point of maximum pessimism -- the precise time that master international investor Sir John Templeton would have told you to invest.

And you should consider that. Because even with the market recovery, some pockets of opportunity remain in that fast-growing market. Names such as A-Power Energy (Nasdaq: APWR), WuXi PharmaTech (NYSE: WX), and Jinpan International (Nasdaq: JST) still haven't fully recovered.

Get ready to buy
That's why you should be licking your chops.

China's rapid economic growth will be theglobal economic story of the next 10 to 20 years. The opportunities are huge, and the country is growing richer by the day. In fact, our Motley Fool Global Gains international investing team recently returned from a research trip to China, where we met with executives at various companies and were generally impressed with how these folks ran their companies.

That does not mean, however, that we'd be willing to pay any price to own them. Today, however, thanks to the decline in the Chinese market, we're looking hard at a long list of Chinese stocks. To see what we're recommending, click hereto try Global Gainsfree for 30 days. There is no obligation to subscribe.

Already a member ofGlobal Gains ? Log in at the top of this page .

This article was first published on Aug. 20, 2007. It has been updated.

Tim Hanson is the co-advisor ofGlobal Gains . He does not own any stocks mentioned. Jinpan is aMotley Fool Hidden Gems pick. The Fool's disclosure policy enjoys Mongolian throat singing.

This article was originally published as The Buying Opportunity You Won't Want to Misson Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.

The Stock Screaming "Buy Me!"

How much money could you make if you found out what reallydrives equity returns?

In this market, I'd wager you could make quite a lot.

Ned Davis Research gave that question a closer look. It studied the period from 1972 to 2006, capturing the era of "fiat" money that followed the United States' departure from the gold standard. The researchers found that bifurcating stocks by onesimple factor made an enormous difference.

That single factor: whether a stock pays a dividend.

Ned Davis found that from 1972 to 2006, S&P stocks that didn'tpay a dividend returned a measly 4.1% annualized. Dividend payers, meanwhile, returned a whopping 10.1% annually!

Keep reading for six dividend samurais
To put this power to work for you, I've got six stock ideas below, based on a special screen.

As a former hedge fund analyst, director of research and analysis for The Motley Fool, and now co-advisor for the Motley Fool Income Investor newsletter, I've read a lot of academic studies in my day, and believe me, a 6-percentage-point difference is absolutely enormous. It leads to a powerful yet simple conclusion: If you're a stock investor, you'll profit by being in dividend stocks.

Finding just one great dividend stock -- the stock that should be screaming "Buy me!" -- can mean an early retirement, not to mention a wealthy one.

But how do you find that one stock?

How to make a fortune in the modern era
Let's consider an actual stock -- Mr. X -- whose identity will remain a secret for a moment. Mr. X isn't glamorous. He wouldn't seem to have a lot going for him. Most people don't even like his product. He's in constant litigation.

But Mr. X has a magic potion: compounding dividends.

If you had put $1,000 into this stock -- it's a real stock, remember -- in 1980 and sold toward the end of 2008, you would have $47,000 in principal gains. That's nice. But if you had reinvestedthe dividends, you would have $213,000!

Who is Mr. X? Altria .

But don't go calling your broker just yet. The thing is, Altria has probably had its day in the sun. It may well be a decent investment, but it's no longer screaming "Buy me!"

The challenge is finding the next Altria -- the nextbig dividend winner -- with returns so large you can buy the castle in Malibu instead of the condo in Cleveland come retirement (but only if you want to).

It's out there today, and it's screaming, "Buy me!" -- but you have to be listening. Toward that end, I'd like to share two must-haves I've learned:

Must-have No. 1: Strong operational returns. The whole point of a business is to turn lead into gold -- to take capital and create even more capital. If return on equity (ROE), return on assets, and return on capital look anemic, investors' returns will probably be, too.

Must-have No. 2: A growing dividend. This signals more than just larger checks in the here and now. It signals a dividend-friendly board, which can mean the difference between a cash-monger and a cash-sharer as the years tick by.

There are pitfalls to watch out for in dividend investing. Don't lose your nest egg by falling through one of these trap doors:

Trap door No. 1: The dividend double-take. I remember when my friend got stood up, left holding a dozen roses in a restaurant full of expectant onlookers. You might not have expectant onlookers, but you don't want a company that ditches its dividend. Look for a payout ratio of less than 80% for most companies. Math whizzes will want to replace net income with free cash flow in the formula, something I do in finding stocks for my newsletter, too.

Trap door No. 2: Closet debt. ROE is great, and rightfully loved by investors ranging from your next-door neighbor to Warren Buffett. But companies know a dirty little trick: Load up on debt, and your ROE soars. That can be great, but don't take that check at face value. The company may have just gotten a lot riskier. Next time you see ROE spike, check to see whether the debt has done the same.

The six dividend samurais
For some starting-point ideas, here are seven stocks with ROE in excess of 10%, debt-to-capital ratios below 50%, free cash flow payout ratios of less than 80%, dividend yields greater than 1.5%, and payouts that have grown in the past year:

Stock

Yield

LTM ROE

Dividend Growth (YOY)

Debt/Capital

Monsanto (NYSE: MON)

1.5%

21.6%

24.7%

15.2%

Covidien (NYSE:COV)

1.7%

15.6%

600%

27%

AstraZeneca (NYSE: AZN)

4.6%

40.7%

41.2%

36.6%

General Dynamics (NYSE: GD)

2.4%

20.3%

11.2%

24.8%

Sherwin-Williams (NYSE: SHW)

2.5%

24.5%

3.7%

29.5%

PepsiCo (NYSE: PEP)

3%

33.4%

9.4%

33.4%

Petsmart (Nasdaq: PETM)

1.7%

18.1%

108.3%

33.3%

Data from Capital IQ, a division of Standard & Poor's.

The above stocks come from a statistically advantageous group, but I believe I have found a whole lot more. Follow this special link, which gives you a month-long guest pass to our Motley Fool Income Investornewsletter, and you'll get our very latest -- and very best -- stock ideas for beating the market.

Here's my promise: Take a free guest pass, and you'll find at least one stock you love within the Income Investorservice. And with more than 70 ready-to-go dividend stock ideas that are beating the market by an average of 8% you'll probably find more than one.

This article was first published Sept. 12, 2007. It has been updated.

James Early owns shares of PepsiCo. PepsiCo is anIncome Investor selection. Petsmart and Sherwin-Williams areStock Advisor selections. Monsanto, Covidien, and General Dynamics areInside Value picks. The Motley Fool has a disclosure policy .

This article was originally published as The Stock Screaming "Buy Me!"on Fool.com

Copyright © 2009 The Motley Fool, LLC. All rights reserved.