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:

19 PHOTOS
Warren Buffett through the years
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Warren Buffett through the years
Investor Warren Buffett answers reporters' questions during a press conference to announce that Walt Disney will buy Capital Cities/ABC July 31.
Billionaire investor Warren Buffett of Omaha makes a rare public appearance during an autograph session outside Borsheim's Jewelry Store in Omaha, May 4. Buffett was signing autographs for shareholders in his company, Berkshire Hathaway, which is having its annual meeting May 5.
Billionaire businessman Warren Buffett sits with his wife Susan (R) and daughter Susie, prior to the annual Berkshire Hathaway shareholders meeting in Omaha, May 5. This marks a rare public appearance for the reclusive Buffett.
Arnold Schwarzenegger, Republican candidate for governor of California in the October 7, 2003 recall election listens as world famous investor, Warren Buffett (L), one of his financial advisors, speaks to reporters after a meeting of Schwarzenegger's Economic Recovery Council in Los Angeles August 20, 2003. REUTERS/Fred Prouser FSP
Billionaire financier Warren Buffett looks on after a meeting with U.S. Senator Arlen Specter (R-PA) and chairman of the Senate Judiciary Committee, at the Hart Senate Office Building on Capitol Hill in Washington June 29, 2005. Specter is the co-author of a bill seeking to create a $140 billion asbestos compensation fund. REUTERS/Shaun Heasley SH/TC
Billionaire Warren Buffett arrives at the Sun Valley Resort in Sun Valley, Idaho July 10, 2007. The world's biggest media chiefs gather this week at the 25th annual Allen & Co. conference at the resort starting today. REUTERS/Rick Wilking (UNITED STATES)
Warren Buffett, chairman and CEO of Berkshire Hathaway, speaks at a Senate Finance Committee hearing about "Federal Estate Tax: Uncertainty in Planning Under the Current Law" on Capitol Hill in Washington, November 14, 2007. Billionaire Buffett warned of widening U.S. income disparity and endorsed the estate tax as a check on wealth accumulation, while two senior lawmakers said they want the tax repealed. REUTERS/Jason Reed (UNITED STATES)
Billionaire financier and Berkshire Hathaway Chief Executive Warren Buffett greets shareholders during the Berkshire Hathaway Annual Shareholders meeting in Omaha, Nebraska May 3, 2008. REUTERS/Carlos Barria (UNITED STATES)
Billionaire investor Warren Buffett laughs as he appears with Microsoft Corporation founder Bill Gates for a town hall style meeting with business students broadcast by financial television network CNBC at Columbia University in New York, November 12, 2009. REUTERS/Mike Segar (UNITED STATES BUSINESS)
Berkshire Hathaway Chairman Warren Buffett kisses his ukulele at the Berkshire Hathaway annual meeting in Omaha May 1, 2010. Buffett played "I've Been Working on the Railroad." REUTERS/Rick Wilking (UNITED STATES - Tags: BUSINESS TRANSPORT)
Billionaire financier and Berkshire Hathaway Chief Executive Warren Buffett (L) and Microsoft founder Bill Gates gesture at the national launch ceremony for the BYD M6 vehicle in Beijing September 29, 2010. Chinese battery and car maker BYD, backed by Buffett, launched its first premium multi-purpose vehicle (MPV) in Beijing on Wednesday to tap rising demand in the world's biggest auto market. REUTERS/Jason Lee (CHINA - Tags: TRANSPORT BUSINESS)
Billionaire Warren Buffett, wearing a traditional tikka or a red mark on the forehead, speaks during a news conference in Bangalore March 22, 2011. Buffett on Tuesday said he is looking to invest in large countries like India, China and Brazil, but added that restrictions on foreign ownership in India's insurance industry could be a deterrent. Buffett also said and the U.S. economy was improving and that the devastating earthquake in Japan would not hurt global growth. REUTERS/Stringer (INDIA - Tags: BUSINESS)
Berkshire Hathaway Chairman Warren Buffett tours the floor of the New York Stock Exchange September 30, 2011. REUTERS/Brendan McDermid (UNITED STATES - Tags: BUSINESS)
Berkshire Hathaway chairman Warren Buffett holds his hand over his heart during the singing of the national anthem, at the start of a 5km race sponsored by Brooks Sports Inc., a Berkshire-owned company, in Omaha May 5, 2013, a day after the company's annual meeting. Buffett at the meeting on May 4, 2013 gave the most extensive comments to date about the future of Berkshire Hathaway Inc after he is gone, saying he still expects the conglomerate to be a partner of choice for distressed companies. REUTERS/Rick Wilking (UNITED STATES - Tags: BUSINESS SPORT ATHLETICS)
Warren Buffett, Chairman of the Board and CEO of Berkshire Hathaway, poses for a portrait in New York October 22, 2013. REUTERS/Carlo Allegri (UNITED STATES - Tags: BUSINESS)
Roberta Buffett Elliott sits with her brother Warren Buffett as they attend an announcement ceremony at Northwestern University in Evanston, Illinois, January 28, 2015. The sister of financial investor Warren Buffett has given Northwestern University more than $100 million to create the Roberta Buffett Institute for Global Studies, the largest single gift in the school's 164-year history, the university said on Wednesday. REUTERS/Jim Young (UNITED STATES - Tags: BUSINESS EDUCATION SOCIETY)
Warren Buffett, chairman and CEO of Berkshire Hathaway, speaks at the Fortune's Most Powerful Women's Summit in Washington October 13, 2015. REUTERS/Kevin Lamarque/File Photo
Warren Buffett, chairman and CEO of Berkshire Hathaway, smiles before speaking with Bill Gates (not pictured), at Columbia University in New York, U.S., January 27, 2017. REUTERS/Shannon Stapleton
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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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