As explained by the legend himself in the recent HBO documentary “Becoming Warren Buffett”, the Oracle of Omaha stays within what he calls his “Circle of Competence” when investing. This according to a recent Forbes article by Validea CEO John Reese.

This includes, writes Reese, “knowing what you know, and steering clear of what you don’t.” He quotes a comment Buffett offers in the film: “Having an edge is enormously important. With that, however, comes the onus of brushing off that which fails to serve you.”

Reese recounts other anecdotes and quotes from the film that reinforce what we already know about the Oracle’s staunch, level-headed approach to value investing. Using his stock screening model fashioned after the Buffett philosophy, Reese offers the following picks:

• Cognizant Technology Solutions (CTSH) is a provider of information technology, consulting and business process services. The company earns high marks based on its predictable earnings and long-term growth in earnings-per-share, and can repay its debt from earnings within two years.
• Apple (AAPL), the tech giant, boasts a favorable ten-year average return-on-equity, and management’s use of retained earnings reflects a return of 21 percent. Cash flow-per-share of $7.30 is a plus.
• Monster Beverage (MNST) develops, markets, sells and distributes energy drink beverages. The company has stable, predictable earnings, a debt-free balance sheet, and shares outstanding have decreased which indicates that management has been using excess capital to increase shareholder value.
• Ross Stores (ROST) is an off-price retailer of name-brand and designer apparel, accessories, footwear and home fashions. Average return-on-equity over the past three years earn high scores for this company, and earnings are sufficient to repay debt within two years.