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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 | 5.39B | -18.54% | |
| Financials | Other Banks | 6.92B | +11.16% | |
| Financials | Wealth Management | 9.44B | +56.68% | |
| Healthcare | Medical Equipment | 2.04B | +54.15% | |
| Financials | Diversified Investment Services | 2.6B | +7.05% | |
| Basic Materials | Gold Mining | 2.92B | +213.83% | |
| Healthcare | Other Biotechnology & Medical Research | 3.01B | +60.10% | |
| Technology | Enterprise Software | 2.2B | +3.85% | |
| Basic Materials | Integrated Mining | 26.8B | +338.29% | |
| Financials | Other Investment Management & Fund Operators | 2.48B | +45.27% | |
| Technology | Other Semiconductor Equipment & Testing | 432B | +41.05% | |
| Healthcare | Other Pharmaceuticals | 9.8B | +39.55% | |
| Industrials | Other Business Support Services | 2.28B | -28.30% | |
| Industrials | Integrated Logistics Operators | 4.53B | +0.68% | |
| Industrials | Fluid Power Cylinder & Actuators | 11.91B | +29.52% | |
| Industrials | Other Industrial Machinery & Equipment | 2.3B | +124.17% | |
| Technology | Other Computer Hardware | 17.55B | +27.69% | |
| Industrials | Other Airlines | 33.92B | +45.14% | |
| Industrials | Other Aerospace & Defense | 21.42B | -3.98% | |
| Consumer Cyclical | Sporting & Outdoor Goods | 3.7B | +52.25% | |
| Industrials | Other Airlines | 24.3B | +27.53% | |
| Consumer Cyclical | Other Home Improvement Products & Services Retailers | 2.55B | +80.10% | |
| Industrials | Smart Grid & Electrical Transmission | 1.42B | +185.33% | |
| Industrials | Other Airlines | 1.77B | +54.23% | |
| Industrials | Industrial Plant | 4.9B | +55.57% | |
| Industrials | Other Construction & Engineering | 2.58B | +152.14% | |
| Industrials | Other Construction & Engineering | 28.1B | +146.41% | |
| Technology | Other Internet Services | 6.96B | -23.28% | |
| Energy | Other Oil & Gas Transportation Services | 7.54B | +35.69% | |
| Consumer Cyclical | Other Toys & Juvenile Products | 8.73B | +48.99% | |
| Consumer Cyclical | Other Casinos & Gaming | 7.61B | +15.92% | |
| Consumer Cyclical | Automobiles & Multi Utility Vehicles | 69.99B | -17.92% | |
| Consumer Cyclical | Travel Agents | 1.17B | -49.12% | |
| Industrials | Other Industrial Machinery & Equipment | 7.4B | +35.33% | |
| Consumer Cyclical | Music, Music Video Production & Distribution | 45.94B | -13.11% | |
| Industrials | Other Heavy Electrical Equipment | 132B | +18.85% | |
| Consumer Cyclical | Other Apparel & Accessories Retailers | 22.03B | +49.51% | |
| Consumer Cyclical | Retail - Department Stores | 1.46B | +44.91% | |
| Industrials | Other Aircraft Parts Manufacturing | 143B | +38.61% | |
| Industrials | Other Aerospace & Defense | 5.77B | +171.74% | |
| Technology | Other Electronic Equipment & Parts | 4.02B | +15.93% | |
| Consumer Cyclical | Other Home Furnishings Retailers | 3.03B | +5.52% | |
| Industrials | Other Aerospace & Defense | 7.63B | +129.17% | |
| Industrials | Other Construction & Engineering | 1.83B | +51.65% | |
| Utilities | Other Multiline Utilities | 1.52B | -16.88% | |
| Consumer Cyclical | Other Restaurants & Bars | 53.48B | -11.34% | |
| Industrials | Other Business Support Services | 2.81B | +47.27% | |
| Industrials | Other Airlines | 3.35B | +34.66% | |
| Industrials | Other Construction & Engineering | 1.68B | +61.29% | |
| Healthcare | Other Pharmaceuticals | 3.83B | +6.81% | |
| Technology | Other Internet Services | 1.59B | -52.62% | |
| Financials | Private Equity | 30.36B | -23.67% | |
| Technology | Enterprise Software | 1.08B | -18.69% | |
| Technology | Semiconductor Machinery Manufacturing | 12.65B | +3.93% | |
| Healthcare | Biopharmaceuticals | 1.29B | -52.48% | |
| Industrials | Industrial Valve Manufacturing | 15.01B | +17.12% | |
| Healthcare | Other Pharmaceuticals | 256B | +20.50% | |
| Technology | Other Integrated Telecommunications Services | 1.71B | -0.91% | |
| Consumer Cyclical | Other Apparel & Accessories Retailers | 199B | +10.48% | |
| Technology | Other Internet Services | 1.34B | -0.05% | |
| Industrials | Other Industrial Machinery & Equipment | 1.28B | -24.57% | |
| Technology | Cloud Computing Services | 4.29B | +21.51% | |
| Technology | Other Software | 6.51B | +18.10% | |
| Consumer Cyclical | Jewelry | 8.61B | -44.12% | |
| Industrials | Financial Information Providers | 40.42B | -3.77% | |
| Technology | Other IT Services & Consulting | 1.74B | +34.61% | |
| Technology | Other Integrated Telecommunications Services | 1.15B | -38.76% | |
| Technology | Other IT Services & Consulting | 3.97B | -2.03% | |
| Industrials | Other Aerospace & Defense | 82.4B | +149.76% | |
| Industrials | Air & Gas Compressors | 2.21B | -19.14% | |
| Consumer Non-Cyclical | Supermarkets & Convenience Stores | 6.16B | +14.70% | |
| Healthcare | Other Pharmaceuticals | 212B | -51.01% | |
| Consumer Non-Cyclical | Other Tobacco | 34.92B | +29.26% | |
| Healthcare | Medical Software & Technology Services | 5.69B | +0.49% | |
| Technology | Other Integrated Telecommunications Services | 8.04B | +16.67% | |
| Healthcare | Other Pharmaceuticals | 280B | +29.10% | |
| Healthcare | Other Pharmaceuticals | 97.85B | +35.61% | |
| Technology | Other Integrated Telecommunications Services | 7B | -10.53% | |
| Consumer Non-Cyclical | Other Personal Products | 147B | -2.64% | |
| Technology | Security & Surveillance | 3.42B | +2.48% | |
News of the components
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