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Investment Themes
This list is designed to capture excess returns on the shares of companies with the best return on equity.
Return on equity (ROE) measures the ratio of net income to the equity invested by the partners or shareholders of a company. This ratio is calculated by dividing net income by shareholders' equity. Expressed as a percentage, it indicates the profitability of the company and its ability to generate profit with the money invested.
A high ROE indicates a good allocation of financial resources to generate cash. Its little brother, ROCE (return on capital employed) takes into account all sources of financing, including debt. A company uses the capital provided by its partners and borrowed funds to invest and run its business. When this activity yields a profit, it is necessary to determine the efficiency of the investments made. This is the role of ROE, which measures the efficiency of the investments made by taking into account only the funds provided by the partners, thus ignoring the debts.
An ROE of 30% means that 10.000 € brought by the associates or shareholders allow to generate 3.000 € of net profit. The more efficient the company is, the higher its ROE and the more investors it attracts. However, it is advisable to compare the ROE of a company with its historical ROE on the one hand, the ROE of the market on the other hand and finally the average ROE of its sector of activities to have a right appreciation of this indicator.
Moreover, ROE is not a stand-alone indicator; it is always necessary to take into account debt management to ensure that the company is on a solid financial footing, in order to reduce the possible risks associated with this investment. Indeed, ROE alone does not take into account the risks taken by the company. A company may have recourse to debt, which increases the ROE by producing a leverage effect, which consequently increases the profitability in an artificial way. This is why an analysis of the balance sheet must be done in parallel.
Stock market history has shown that companies with the best ROE outperform their respective markets. According to a Credit Suisse study, between 1965 and 2015, the top 20% of companies in terms of return on equity (ROE) outperformed the bottom 20% by an average of 17% per year. A study by Greenwald, Kahn, Sonkin, and van Biema (2010) found that ROE is a key driver of long-term stock performance. The study analyzed data on U.S. stocks between 1975 and 2009 and found that companies with high and stable ROE tend to outperform the market over the long run, while companies with low and volatile ROE tend to underperform. Studies across most of the world's stock markets have found the same thing: Hsu, Wu, and Yeh (2014) about the Taiwanese market, Kocenda and Vojtek (2017) about the European market, Haugen and Baker (2018) about the European and U.S. market, Ahmed and Ahmed (2019) about the Indian market, Chan and Zhang (2021) about the U.S. market. In each case, the stocks with the highest ROE outperform their respective markets long-term.
Our selection
 | Consumer Cyclical | Other Construction Supplies & Fixtures | 12.79B | +1.59% | |
| Basic Materials | Gold Mining | 2.49B | -3.00% | |
| Technology | Other Semiconductors | 5,343B | +18.29% | |
| Technology | Application Software | 160B | -29.22% | |
| Technology | Storage Devices | 205B | +482.73% | |
| Technology | Other Semiconductors | 788B | +144.82% | |
| Technology | Other Semiconductors | 31.17B | +17.44% | |
| Healthcare | Medical Software & Technology Services | 9.64B | -41.73% | |
| Consumer Cyclical | Toys & Games Retailers | 25.71B | -19.07% | |
| Basic Materials | Other Specialty Mining & Metals | 6.08B | +40.89% | |
| Basic Materials | Integrated Mining | 31.52B | -1.98% | |
| Basic Materials | Gold Mining | 45.17B | +4.76% | |
| Basic Materials | Other Gold | 1.01B | -29.48% | |
| Basic Materials | Integrated Mining | 6.26B | +17.25% | |
| Basic Materials | Gold Mining | 3.47B | -18.15% | |
| Basic Materials | Other Gold | 49.68B | -4.73% | |
| Basic Materials | Gold Mining | 4.92B | -20.00% | |
| Technology | Other Software | 324B | -23.90% | |
| Technology | Other Semiconductor Equipment & Testing | 20.31B | +20.26% | |
| Basic Materials | Other Gold | 2.75B | -10.60% | |
| Basic Materials | Gold Mining | 32.74B | -2.38% | |
| Technology | Other Communications & Networking | 178B | +8.05% | |
| Financials | Other Investment Management & Fund Operators | 75.07B | -10.00% | |
| Technology | Other Software | 3,101B | -13.69% | |
| Financials | Other Banks | 8.1B | +15.54% | |
| Basic Materials | Gold Mining | 5.99B | +41.74% | |
| Technology | Other Semiconductors | 171B | +391.52% | |
| Technology | Semiconductor Testing Equipment & Service | 115B | +30.51% | |
| Technology | Storage Devices | 157B | +164.58% | |
| Technology | Other Semiconductors | 1,946B | +18.77% | |
| Basic Materials | Gold Mining | 3.68B | +15.04% | |
| Technology | Internet Security & Transactions Services | 442B | -12.47% | |
| Technology | Semiconductor Machinery Manufacturing | 23.4B | +95.66% | |
| Technology | Other Semiconductor Equipment & Testing | 557B | +40.18% | |
| Technology | Search Engines | 4,682B | +23.85% | |
| Basic Materials | Other Gold | 17.21B | -10.33% | |
| Basic Materials | Copper Ore Mining | 2.75B | -6.52% | |
| Technology | Semiconductor Testing Equipment & Service | 227B | +43.25% | |
| Healthcare | Other Pharmaceuticals | 911B | -4.96% | |
| Financials | Other Investment Management & Fund Operators | 1.76B | -31.21% | |
| Technology | Enterprise Software | 1.92B | -14.11% | |
| Technology | Enterprise Software | 1.5B | -29.46% | |
| Technology | Internet Gaming | 3.35B | -18.43% | |
| Industrials | Management Consulting Services | 5.45B | -15.82% | |
| Consumer Cyclical | Gift, Novelty & Souvenir Stores | 7.03B | -11.34% | |
| Basic Materials | Gold Mining | 14.01B | +12.68% | |
| Basic Materials | Gold Mining | 1.89B | -2.86% | |
| Technology | Security Software | 93.52B | +60.74% | |
| Technology | Cloud Computing Services | 3.52B | -24.69% | |
| Basic Materials | Gold Mining | 3.97B | +14.41% | |
| Technology | Other Internet Services | 77.84B | -3.36% | |
| Technology | Enterprise Software | 6.58B | -11.41% | |
| Technology | Other Internet Services | 2.56B | -25.97% | |
| Technology | Other Semiconductor Equipment & Testing | 342B | +59.70% | |
| Technology | Phones & Smart Phones | 4,391B | +9.97% | |
| Healthcare | Bio Therapeutic Drugs | 8.09B | +19.17% | |
| Technology | Semiconductor Testing Equipment & Service | 50.33B | +66.11% | |
| Technology | Semiconductor Machinery Manufacturing | 323B | +58.34% | |
| Consumer Non-Cyclical | Bottled Water & Ice | 61.82B | -7.51% | |
| Technology | Application Software | 103B | -27.14% | |
| Financials | Wealth Management | 10.95B | +11.00% | |
| Technology | Application Software | 51.55B | -17.52% | |
| Technology | Social Media & Networking | 1,530B | -8.71% | |
| Technology | Financial Technology (Fintech) (NEC) | 111B | -39.66% | |
| Consumer Cyclical | Other Apparel & Accessories Retailers | 5.98B | -9.04% | |
| Healthcare | Veterinary Medical Equipment & Supplies | 43.11B | -19.22% | |
| Industrials | Industrial Valve Manufacturing | 22.2B | +54.55% | |
| Technology | Other Internet Services | 376B | -4.72% | |
| Technology | Other Communications & Networking | 63.82B | +141.49% | |
| Technology | Other Communications & Networking | 456B | +49.79% | |
| Technology | Other Software | 6.06B | +71.44% | |
| Healthcare | Other Pharmaceuticals | 39.29B | -25.99% | |
| Consumer Cyclical | Other Casinos & Gaming | 7.05B | +9.96% | |
| Technology | Enterprise Software | 5.65B | -31.30% | |
| Technology | Enterprise Software | 5.6B | -43.90% | |
| Consumer Cyclical | Other Footwear | 13.38B | -9.07% | |
| Consumer Cyclical | Other Restaurants & Bars | 6.79B | -9.20% | |
| Consumer Cyclical | Hotels & Motels | 5.01B | -7.54% | |
| Healthcare | Other Biotechnology & Medical Research | 11.99B | -25.24% | |
| Industrials | Other Aerospace & Defense | 129B | +3.38% | |
| Technology | Fiber Optic Cable Manufacturing | 36.02B | +346.81% | |
| Utilities | Other Electric Utilities | 272B | +54.81% | |
| Consumer Non-Cyclical | Cosmetics & Perfumes | 2.05B | -44.70% | |
| Technology | Other Communications & Networking | 76.63B | +131.72% | |
| Consumer Non-Cyclical | Other Personal Services | 4.36B | +7.51% | |
| Energy | Other Renewable Energy Equipment & Services | 166B | +43.46% | |
| Healthcare | Bio Therapeutic Drugs | 1.74B | +23.29% | |
| Healthcare | Other Pharmaceuticals | 5.59B | +32.27% | |
| Industrials | Other Aircraft Parts Manufacturing | 101B | +23.46% | |
| Industrials | Other Aerospace & Defense | 22.93B | +13.53% | |
| Healthcare | Other Medical Equipment, Supplies & Distribution | 25.83B | +0.87% | |
| Industrials | Other Aerospace & Defense | 298B | -7.39% | |
| Healthcare | Other Pharmaceuticals | 4.39B | -34.43% | |
| Consumer Non-Cyclical | Other Brewers | 4.04B | -1.87% | |
| Industrials | Other Aerospace & Defense | 20.53B | +31.09% | |
| Healthcare | Veterinary Drugs | 1.38B | -9.26% | |
| Healthcare | Other Pharmaceuticals | 3.77B | -6.27% | |
| Consumer Non-Cyclical | Other Food Retail & Distribution | 8.47B | +12.99% | |
| Healthcare | Other Pharmaceuticals | 554B | +11.14% | |
| Industrials | Other Aerospace & Defense | 28.81B | +22.24% | |
News of the components
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