For Immediate Release
Chicago, IL – March 1, 2021 – Stocks in this week’s article are CDW Corporation
CDW
, Apple Inc.
AAPL
, Lam Research Corp.
LRCX
, Polaris Inc.
PII
and D.R. Horton, Inc.
DHI
.
5 ROE Stocks to Buy as High Bond Yields Imply Economic Rebound
The U.S. equity market has been trading near all-time highs in the past couple of days buoyed by relatively healthy economic recovery on better-than-expected jobless claims and uptick in household spending. Federal Reserve Chairman Jerome Powell has further pledged to remain accommodative with its near zero interest rates and monthly bond purchases until the desired unemployment and inflation targets are achieved.
However, surging bond yields have suddenly made stock market valuations appear less attractive, leading to broader equity market decline. Notably, the 10-year Treasury yield has hit a high of 1.6%.
As investors employ a wait-and-see approach in a classic example of “backing and filling” in the market, they can benefit from ‘cash cow’ stocks that garner higher returns. However, identifying cash-rich stocks alone does not make for a solid investment proposition unless it is backed by attractive efficiency ratios like return on equity (ROE). A high ROE ensures that the company is reinvesting cash at a high rate of return.
ROE: A Key Metric
ROE = Net Income/Shareholders’ Equity
ROE helps investors distinguish profit-generating companies from profit burners and is useful in determining the financial health of a company. In other words, this financial metric enables investors to identify companies that diligently deploy cash for higher returns.
Moreover, ROE is often used to compare the profitability of a company with other firms in the industry — the higher, the better. It measures how well a company is multiplying its profits without investing new equity capital and portrays management’s efficiency in rewarding shareholders with attractive risk-adjusted returns.
For the rest of this Screen of the Week article please visit Zacks.com at:
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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
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Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They’re virtually unknown to the general public. Yet today’s 220 Zacks Rank #1 “Strong Buys” were generated by the stock-picking system that has more than doubled the market from 1988 through 2016. Its average gain has been a stellar +25% per year.
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