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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
| Technology | Other Internet Services | 8.15B | +21.56% | ||
| Financials | Other Investment Management & Fund Operators | 4.28B | +6.76% | ||
| Technology | Other Semiconductors | 3,904B | +19.15% | ||
| Financials | Other Investment Management & Fund Operators | 5.55B | +22.16% | ||
| Healthcare | Other Biotechnology & Medical Research | 1.71B | -7.52% | ||
| Healthcare | Medical Software & Technology Services | 21.41B | +25.81% | ||
| Consumer Non-Cyclical | Other Personal Products | 7.86B | +15.83% | ||
| Healthcare | Medical Equipment | 1.5B | +12.92% | ||
| Basic Materials | Gold Mining | 2.71B | +47.45% | ||
| Basic Materials | Gold Mining | 1.79B | +56.79% | ||
| Technology | Other Internet Services | 20.34B | +0.73% | ||
| Technology | Social Media & Networking | 1,812B | +23.08% | ||
| Basic Materials | Gold Mining | 3.77B | +81.34% | ||
| Financials | Other Investment Management & Fund Operators | 89.1B | -3.03% | ||
| Technology | Other Software | 3,691B | +17.82% | ||
| Financials | Other Financial & Commodity Market Operators | 13.01B | +20.96% | ||
| Technology | Financial Technology (Fintech) (NEC) | 15.95B | -11.75% | ||
| Financials | Other Financial & Commodity Market Operators | 67.2B | +39.62% | ||
| Financials | Other Banks | 7.09B | +17.46% | ||
| Technology | Application Software | 117B | +6.46% | ||
| Healthcare | Specialty & Advanced Pharmaceuticals | 6.88B | +16.71% | ||
| Basic Materials | Gold Mining | 1.38B | +41.56% | ||
| Healthcare | Other Pharmaceuticals | 5.19B | +18.31% | ||
| Healthcare | Other Pharmaceuticals | 313B | -29.09% | ||
| Industrials | Outsourcing & Staffing Services | 52.24B | +3.34% | ||
| Financials | Other Consumer Lending | 5.97B | +15.69% | ||
| Technology | Other Semiconductors | 1,278B | +17.24% | ||
| Consumer Cyclical | Toys & Games Retailers | 45.61B | +197.60% | ||
| Technology | Enterprise Software | 2.65B | +23.82% | ||
| Industrials | Management Consulting Services | 7.92B | +44.51% | ||
| Technology | Other Semiconductors | 16.02B | +38.91% | ||
| Basic Materials | Gold Mining | 22.8B | +95.93% | ||
| Consumer Cyclical | Gift, Novelty & Souvenir Stores | 10.61B | +21.35% | ||
| Healthcare | Other Pharmaceuticals | 1.88B | -4.82% | ||
| Technology | Cloud Computing Services | 5.37B | +5.39% | ||
| Technology | Enterprise Software | 8.77B | +28.94% | ||
| Technology | Security Software | 82.31B | +13.82% | ||
| Technology | Enterprise Software | 1.17B | -16.36% | ||
| Financials | Other Investment Management & Fund Operators | 2.24B | +27.91% | ||
| Technology | Enterprise Software | 2.79B | +21.26% | ||
| Technology | Semiconductor Testing Equipment & Service | 54.58B | +19.37% | ||
| Consumer Non-Cyclical | Bottled Water & Ice | 56.16B | +13.84% | ||
| Technology | Application Software | 162B | -14.04% | ||
| Technology | Search Engines | 2,120B | -7.89% | ||
| Technology | Financial Technology (Fintech) (NEC) | 218B | +24.34% | ||
| Basic Materials | Gold Mining | 1.88B | +20.92% | ||
| Technology | Other Semiconductor Equipment & Testing | 128B | +38.21% | ||
| Basic Materials | Gold Mining | 1.98B | +105.54% | ||
| Technology | Other Internet Services | 543B | +43.08% | ||
| Technology | Internet Gaming | 3.15B | +102.39% | ||
| Technology | Other Software | 2.66B | +7.39% | ||
| Industrials | Transaction & Payment Services | 3.24B | +0.71% | ||
| Technology | Enterprise Software | 212B | -3.50% | ||
| Technology | Security Software | 136B | +12.11% | ||
| Industrials | Integrated Logistics Operators | 4.28B | -4.25% | ||
| Technology | Other Internet Services | 3.33B | -7.77% | ||
| Consumer Non-Cyclical | Cosmetics & Perfumes | 4.12B | +75.82% | ||
| Consumer Cyclical | Other Footwear | 15.73B | -48.16% | ||
| Consumer Cyclical | Other Apparel & Accessories | 1.2B | +4.22% | ||
| Consumer Cyclical | Hotels & Motels | 4.85B | +31.09% | ||
| Technology | Storage Devices | 21.37B | -8.12% | ||
| Real Estate | Residential Real Estate Services | 1.72B | -12.68% | ||
| Technology | Enterprise Software | 10.23B | -7.15% | ||
| Consumer Cyclical | Jewelry | 23.8B | +347.76% | ||
| Industrials | Transaction & Payment Services | 1.49B | +8.32% | ||
| Technology | Electronic Component | 118B | +40.26% | ||
| Technology | Enterprise Software | 15.75B | -13.33% | ||
| Technology | Other Internet Services | 11.85B | +30.31% | ||
| Industrials | Other Business Support Services | 7.34B | +1.60% | ||
| Technology | Other IT Services & Consulting | 4.57B | +10.96% | ||
| Industrials | Other Aerospace & Defense | 32.06B | +30.12% | ||
| Consumer Cyclical | Other Apparel & Accessories Retailers | 2.16B | +41.08% | ||
| Consumer Cyclical | Auto & Truck Parts Wholesale | 1.08B | +14.94% | ||
| Industrials | Heating, Ventilation & Air Conditioning Systems | 95.2B | +15.58% | ||
| Real Estate | Other Real Estate Services | 2.26B | +5.08% | ||
| Consumer Cyclical | Internet & Mail Order Department Stores | 9.45B | +3.76% | ||
| Consumer Cyclical | Sports & Outdoor Footwear | 18.31B | +21.48% | ||
| Consumer Cyclical | Other Apparel & Accessories Retailers | 4.14B | -41.80% | ||
| Technology | E-commerce & Auction Services | 126B | +45.64% | ||
| Consumer Cyclical | Other Appliances, Tools & Housewares | 14.89B | +8.41% | ||
| Industrials | Other Airlines | 22.77B | +19.11% | ||
| Technology | Other Wireless Telecommunications Services | 2.08B | +94.81% | ||
| Healthcare | Telemedicine Services | 10.96B | +102.48% | ||
| Consumer Non-Cyclical | Other Food Retail & Distribution | 15.55B | +25.03% | ||
| Healthcare | Other Pharmaceuticals | 4.18B | +18.48% | ||
| Healthcare | Biopharmaceuticals | 1.67B | +2.19% | ||
| Healthcare | Other Pharmaceuticals | 698B | +0.73% | ||
| Consumer Cyclical | Kitchen Appliances | 9.6B | -11.59% | ||
| Healthcare | Veterinary Medical Equipment & Supplies | 43.33B | +30.33% | ||
| Technology | Other Communications & Networking | 272B | +15.86% | ||
| Healthcare | Other Advanced Medical Equipment & Technology | 20.7B | -6.25% | ||
| Healthcare | Other Biotechnology & Medical Research | 9.27B | -2.93% | ||
| Healthcare | Other Medical Equipment, Supplies & Distribution | 32.84B | +7.70% | ||
| Industrials | Other Aerospace & Defense | 263B | +48.12% | ||
| Industrials | Other Aircraft Parts Manufacturing | 72.44B | +64.09% | ||
| Consumer Non-Cyclical | Cosmetics & Perfumes | 4.16B | +133.43% | ||
| Consumer Non-Cyclical | Other Personal Services | 4.24B | +5.38% | ||
| Industrials | Other Aircraft Parts Manufacturing | 134B | +31.21% | ||
| Consumer Non-Cyclical | Consumer Repair Services | 4.95B | +7.71% | ||
| Financials | Health Insurance | 9.02B | +32.45% | ||
News of the components
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