3 Warren Buffett stocks to buy in September

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So far in 2016, Warren Buffett's Berkshire Hathaway (NYSE:BRK-A) (NYSE:BRK-B) has continued its rich tradition of beating the broader markets, and done so in impressive fashion:

BRK.B DATA BY YCHARTS

The secret behind Berkshire's enduring success has been its defensive investing strategy, which entails (among other things) owning companies with strong economic moats, solid balance sheets, and top managerial teams -- but not necessarily jaw-dropping growth prospects. With this in mind, three of our Foolish contributors discuss the merits of stocks that sport those key characteristics. Read on to find out which ones they recommend and why.

Trash can be treasure

Daniel Miller: Investors looking for "Warren Buffett" stocks should prioritize companies that possess economic moats.

One stock that fits the bill is Stericycle (NASDAQ:SRCL). It's difficult to summarize all of the services Stericycle provides, but among its chief services, it helps businesses such as hospitals, clinics and dental offices deal with the complicated and strictly regulated process of disposing of medical, hazardous, and pharmaceutical waste. As such, the company is a highly trusted provider of high-value, high-margin, outsourced services.

Stericycle helps businesses comply with standards from a wide array of regulatory agencies, such as the EPA, DEA, FDA, OSHA, DOT, HIPAA, and FACTA, among others. As regulations grew stricter and the costs of compliance skyrocketed, the number of companies competing with Stericycle dropped precipitously. The company now possesses unrivaled scale and regulatory experience in its niches.

RELATED: Warren Buffett through the years:

14 PHOTOS
Warren Buffett through the years
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Warren Buffett through the years
Warren Buffett speaks to the media during a press conference Monday, June 26, 2006 in New York. Buffet, the chairman of Berkshire Hathaway, recently announced his intention of giving 10 million shares of his company to charitable organizations, the majority going to the Bill and Melinda Gates Foundation. (AP Photo/Seth Wenig)
NEW YORK, UNITED STATES: California Governor Arnold Schwarzenegger (L) cofers with billionaire investor Warren Buffet (R) during a meeting with Wall Street investors at the Ritz Carlton hotel February 25, 2004 in New York City. AFP PHOTO/POOL/Kathy WILLENS (Photo credit should read KATHY WILLENS/AFP/Getty Images)
Investor Warren Buffet participates in the Treasury Conference on U.S. Capital Markets Competitiveness, Tuesday, March 13, 2007, at Georgetown University in Washington. (AP Photo/Gerald Herbert)
CLEVELAND - MARCH 25: Philanthropist Warren Buffet (C) wears a LeBron James Witness tee-shirt as he cheers for the Cleveland Cavaliers during a game against the Denver Nuggets March 25, 2007 at The Quicken Loans Arena in Cleveland, Ohio. NOTE TO USER: User expressly acknowledges and agrees that, by downloading and/or using this Photograph, user is consenting to the terms and conditions of the Getty Images License Agreement. Mandatory Copyright Notice: Copyright 2007 NBAE (Photo by David Liam Kyle/NBAE via Getty Images)
** FILE ** In this May 21, 2008 file photo, U.S. Billionaire investor Warren Buffet speaks during a news conference in Madrid. Buffett's Berkshire Hathaway Inc. is investing at least $5 billion in Goldman Sachs Group Inc., Goldman announced Tuesday, Sept. 23, 2008. (AP Photo/Paul White, file)
Warren Buffet, chairman of Bershire Hathaway, arrives for the annual Allen & Co.'s media conference Wednesday, July 9, 2008, in Sun Valley, Idaho. (AP Photo/Douglas C. Pizac)
FILE - In this May 2, 2009 file photo, Warren Buffett, CEO of Berkshire Hathaway, right, waves to shareholders prior to the annual Berkshire Hathaway shareholders meeting in Omaha, Neb. Warren Buffet's Berkshire Hathaway said Tuesday, Nov. 3, 2009, it has agreed to buy Burlington Northern Santa Fe in a deal valuing the railroad at $34 billion.(AP Photo/Nati Harnik, file)
Warren Buffet heads to lunch after a morning session at the Sun Valley Inn for the 2011 Allen and Co. Sun Valley Conference, Thursday, July 7, 2011, in Sun Valley, Idaho. (AP Photo/Julie Jacobson)
Warren Buffett is interviewed in the White House Briefing Room in Washington, Monday, July 18, 2011, following his meeting with President Barack Obama. Obama met with members of the Giving Pledge including, Buffett and Bill and Melinda Gates, and others to receive and update on the program. (AP Photo/Pablo Martinez Monsivais)
Billionaire investor Warren Buffet at the Allen & Company Sun Valley Conference in Sun Valley, Idaho, Friday, July 13, 2012. (AP Photo/Paul Sakuma)
Warren Buffett, chairman of Berkshire Hathaway Inc., right, speaks to David Rubenstein, co-founder and managing director of the Carlyle Group, during the Economic Club of Washington dinner event in Washington, D.C., U.S., on Tuesday, June 5, 2012. Buffett said he doesn't expect another U.S. recession unless Europe's crisis spreads. Photographer: Andrew Harrer/Bloomberg via Getty Images
DETROIT, MI - SEPTEMBER 18: Billionaire investor Warren Buffett speaks at an event called, 'Detroit Homecoming' September 18, 2014 in Detroit, Michigan. The purpose of the invitation-only event of Detroit expatriats is to give the group a chance to reconnect, reinvest and reinvent with their hometown. The topic of Buffet's conversation was, 'Why I'm Bullish on Detroit.' (Photo by Bill Pugliano/Getty Images)
Warren E. Buffett, Chairman of the Board and Chief Executive Officer, Berkshire Hathaway Inc., participates in a NADA Automotive forum happening in conjunction with the New York International Auto Show, Tuesday, March 31, 2015, in New York. (AP Photo/Mary Altaffer)
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There are a couple of growth catalysts that should benefit Stericycle and its investors. Rising costs have created an environment in which many hospitals are choosing to outsource medical waste services rather than operate their own expensive incinerators. It's easier and cheaper for Stericycle to scale up and dispose of waste from multiple hospitals than it is for individual hospitals to efficiently destroy their own waste.

Also, the company has recently begun to expand the services it offers. For example, last year, it acquired document destruction specialist Shred-It. If Stericycle can expand its customer base beyond the healthcare industry, it could open the floodgates for its top and bottom lines. However, there is a risk that if Stericycle stretches too far and can't create synergies between its offerings, it could fail to return value to shareholders.

Fortunately, as you can see in the graph below, Stericycle has a solid track record of financial performance, making this a Warren Buffett stock, in my opinion.

IMAGE SOURCE: STERICYCLE'S STORY PRESENTATION

The rare pharma stock that fits Buffett's bill

George Budwell: Since its inception, Berkshire Hathaway hasn't owned many pharmaceutical stocks, presumably due to their lack of strong economic moats. The pharmaceutical industry, after all, is known for its rapid pace of innovation, intense competition, and a precarious regulatory environment that can erode profits in the blink of an eye.

Johnson & Johnson (NYSE:JNJ), though, has occupied a space in Berkshire's portfolio for over a decade at this point, and for good reason. Despite the typical churn of products within its pharma business segment, J&J's total returns have still outpaced those of the S&P 500over the last decade by a wide margin:

JNJ TOTAL RETURN PRICE DATA BY YCHARTS.

The key to its success has been J&J's commitment to spending a significant chunk of its cash flow on R&D to replenish its pharma product portfolio. In this way, it has been able to remain one of the fastest-growing pharmaceutical companies in the world, which has enabled the company to post 32 consecutive years of adjusted earnings increases and 54 consecutive years of dividend increases.

But the best part -- and the main reason to buy this stock now -- is that there's no reason to believe those trend will reverse course anytime soon. J&J's immense clinical pipeline sports more than 30 late-stage trials at the moment, putting it on track to bring multiple new products to market and win label expansions for older ones within the next few years.

This farm-equipment leader has proved its mettle, yet again

Neha Chamaria: Did you hear about Warren Buffett unwinding Berkshire's nearly 6% stake inDeere & Company (NYSE:DE) during the second quarter? Good if you didn't, for August turned out to be one of Deere's best months in recent times, with the stock surging almost 10%.

Farming's fundamentals have weakened considerably in recent quarters as low crop prices have hurt farm income and reduced demand for new farm equipment. Buffett, perhaps, doesn't expect things to improve in the near term, which is why he sold off some shares. But wait: That was in the second quarter, and I wouldn't be surprised if Berkshire Hathaway's third-quarter filings reveal higher stakes in Deere again. That's because Deere remains firmly on a growth track, irrespective of the business conditions.

Deere not only crushed analysts' estimates by a gaping margin during its last quarter, it also upgraded its full-year net income outlook by almost 13% to $1.35 billion. That comes on the back of aggressive cost-control moves that are helping Deere grow its profits despite challenges: Its equipment operations (which exclude its financial arm) earned 3% higher net profits year over year in the last quarter on 14% lower sales. Management even suggested another $500 million in cost reductions by 2018 if the agriculture markets remain weak. That should renew investors' confidence in management, and remove any fears of a dividend cut. In fact, Deere was also free-cash-flow positive in the last twelve months, and continues to boast best-in-class returns on equity.

Long story short, I believe Deere's strong execution in the last quarter to have been a good wake-up call for investors who lost faith in the industry stalwart in recent months.

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