The Only Buffett Pick Signaling ‘Buy’ Right Now

Only companies with high RS and strong cash flow growth pass my “buy” test. Even after years of running this system, I’m often surprised by the results.

For example, Buffett’s latest regulatory filings tell us that he’s been buying more of his largest holding, Wells Fargo & Co (NYSE:WFC).

Wells Fargo is a great company. Based on return on equity and return on assets, WFC is ranked second among major banks. But here’s the surprising part: My system says WFC is not a “buy” right now.

In this case, Buffett is buying for the future and is comfortable owning stocks that deliver only small gains for years at a time — bad news if you’re an investor simply mimicking all of Buffett’s portfolio moves.

Unlike Buffett, with his large supply of cash, an individual does not have the luxury of waiting for the market to recognize value, and that is why I apply an RS filter. As I said, RS finds stocks that are moving up now.

Right now, that system is pointing us toward U.S. Bancorp (NYSE:USB), another Buffett holding and the only major bank that beat out Wells Fargo in return on equity and return on assets.

U.S. Bancorp has increased its free cash flow per share by 171% in the past 12 months. USB has an RS rank of 73, which indicates that it has outperformed 73% of all other stocks in the past six months. I consider stocks with an RS rank greater than 70 to be buys.

USB is the only Buffett holding that my system ranks as a buy right now. His other stocks are outstanding long-term holdings, but USB is a buy today.

This article was originally written by Michael J. Carr and posted on StreetAuthority.

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