A Warren Buffett Type Stock: MWIV

It’s hard to find needles in so many haystacks when it comes to picking stocks for secure ROIC (ROIC = Net operating profit after taxes / Invested capital). Warren Buffett has been doing it for years and many wish they also had the foresight to be able to invest like Berkshire Hathaway’s CEO. So when screening for stocks and you find the following:

• Return on equity greater than 15%
• Debt to equity ratio less than 50%
• Steady or improving net and gross margins over the past two or three years
• Proprietary valuation model that predicts at least a 10% upside
• No SEC inquiries or accounting issues
• Not involved in a merger or acquisition

It’s a pretty clear case for a safe investment based on ROIC. ROIC is the most important measurement when it comes to value investments. By calculating a companys ROIC, shareholders can see how well its using the cash and if its creating value for investors. ROIC divides a companys operating profit by how much investment it took to get the operating profit.

MWIV completed an acquisition of Micro Beef Technologies, Ltd. on October 31 for $60 million which should benefit their already growing ROIC for fiscal year end September 30,2012. Micro Beef Technologies, Ltd. is a value-added distributor to the production animal market, including the distribution of micro feed ingredients, pharmaceuticals, vaccines, parasiticides, supplies, and other animal health products.

MWI Veterinary Supplys ROIC has steadily increased over the last 5 years. Companies with consistently high ROIC show theyre efficiently using investor capital. These companies also have the ability to treat their shareholders well since the company can use their extra cash to pay out dividends, buy back shares, or further invest into their franchise for growth. These are companies that Warren Buffett has long loved.

MWI Veterinary Supply, Inc. (NASDAQ: MWIV)

Current Company Snapshot:

Price: 66.92

1y Target Est: 83.33

Day’s Range: 66.14 68.04

52wk Range: 59.95 90.24

Avg Vol (3m): 72,719

Short Interest: 1,060,000  (as of December 15, 2011 )

MWIV was upgraded by analysts at CL King from a buy rating to a strong buy rating.