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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 | 1.31TCr | +1.23% | |
| Technology | Other Semiconductors | 4,43800Cr | -2.06% | |
| Technology | Application Software | 17TCr | -23.24% | |
| Consumer Cyclical | Toys & Games Retailers | 3.5TCr | +9.75% | |
| Technology | Storage Devices | 8.69TCr | +148.01% | |
| Healthcare | Medical Software & Technology Services | 968.41Cr | -36.75% | |
| Technology | Other Semiconductors | 2.14TCr | -19.40% | |
| Basic Materials | Integrated Mining | 3.46TCr | +9.90% | |
| Basic Materials | Gold Mining | 435.6Cr | +31.40% | |
| Technology | Other Software | 37TCr | -11.99% | |
| Technology | Other Semiconductors | 44TCr | +36.41% | |
| Basic Materials | Gold Mining | 5.5TCr | +27.70% | |
| Basic Materials | Gold Mining | 238.35Cr | 0.00% | |
| Basic Materials | Gold Mining | 414.03Cr | -8.21% | |
| Basic Materials | Other Gold | 122.58Cr | -7.88% | |
| Basic Materials | Gold Mining | 421.17Cr | +7.15% | |
| Basic Materials | Gold Mining | 524.22Cr | -6.62% | |
| Technology | Application Software | 470.82Cr | -42.43% | |
| Basic Materials | Gold Mining | 135.88Cr | -22.49% | |
| Basic Materials | Other Gold | 278.01Cr | -2.37% | |
| Healthcare | Bio Therapeutic Drugs | 1.1TCr | -3.33% | |
| Technology | Other Communications & Networking | 17TCr | +4.69% | |
| Technology | Other Software | 3,04000Cr | -15.34% | |
| Financials | Other Financial & Commodity Market Operators | 1.47TCr | +7.61% | |
| Technology | Security Software | 1.73TCr | -13.32% | |
| Basic Materials | Gold Mining | 888.73Cr | +27.34% | |
| Technology | Financial Technology (Fintech) (NEC) | 1.99TCr | -12.76% | |
| Financials | Other Financial & Commodity Market Operators | 6.58TCr | +2.21% | |
| Financials | Other Banks | 781.6Cr | +9.84% | |
| Basic Materials | Gold Mining | 674.29Cr | +60.11% | |
| Technology | Semiconductor Testing Equipment & Service | 11TCr | +22.61% | |
| Technology | Other Semiconductors | 1,63700Cr | -0.10% | |
| Technology | Other Semiconductor Equipment & Testing | 26TCr | +23.35% | |
| Technology | Internet Security & Transactions Services | 46TCr | -9.31% | |
| Technology | Other Semiconductors | 6.21TCr | +87.54% | |
| Technology | Other Semiconductor Equipment & Testing | 51TCr | +27.63% | |
| Financials | Other Investment Management & Fund Operators | 7.4TCr | -13.24% | |
| Basic Materials | Other Gold | 1.99TCr | +11.59% | |
| Technology | Semiconductor Testing Equipment & Service | 19TCr | +17.61% | |
| Healthcare | Other Pharmaceuticals | 90TCr | -6.17% | |
| Basic Materials | Integrated Mining | 564.95Cr | +14.39% | |
| Technology | Enterprise Software | 164.3Cr | -23.14% | |
| Technology | Internet Gaming | 443.21Cr | +16.04% | |
| Industrials | Management Consulting Services | 454.08Cr | -28.03% | |
| Technology | Other Internet Services | 225.86Cr | -21.06% | |
| Consumer Cyclical | Beauty Supply Shop | 471.7Cr | -7.89% | |
| Consumer Cyclical | Gift, Novelty & Souvenir Stores | 886.66Cr | +13.50% | |
| Basic Materials | Gold Mining | 1.54TCr | +21.63% | |
| Technology | Cloud Computing Services | 343.77Cr | -27.49% | |
| Technology | Security Software | 6.2TCr | +5.54% | |
| Industrials | Other Shipbuilding | 1.26TCr | +16.38% | |
| Technology | Financial Technology (Fintech) (NEC) | 1.39TCr | -6.44% | |
| Technology | Other Internet Services | 322.22Cr | -11.73% | |
| Technology | Enterprise Software | 199.77Cr | -18.43% | |
| Technology | Phones & Smart Phones | 3,81500Cr | -4.41% | |
| Technology | Storage Devices | 8.88TCr | +52.12% | |
| Technology | Application Software | 12TCr | -19.30% | |
| Consumer Non-Cyclical | Bottled Water & Ice | 6.42TCr | -3.25% | |
| Technology | Semiconductor Testing Equipment & Service | 4.64TCr | +53.15% | |
| Financials | Wealth Management | 992.17Cr | -1.05% | |
| Technology | Social Media & Networking | 1,63800Cr | -1.92% | |
| Technology | Application Software | 5.5TCr | -11.91% | |
| Technology | Financial Technology (Fintech) (NEC) | 13TCr | -28.49% | |
| Basic Materials | Gold Mining | 457.93Cr | +31.45% | |
| Healthcare | Veterinary Medical Equipment & Supplies | 4.86TCr | -9.77% | |
| Technology | Semiconductor Machinery Manufacturing | 27TCr | +31.89% | |
| Consumer Cyclical | Guided Tour Operators | 3.24TCr | +1.68% | |
| Technology | Other Software | 459.04Cr | +31.78% | |
| Healthcare | Other Pharmaceuticals | 4.29TCr | -18.62% | |
| Technology | Other IT Services & Consulting | 8.98TCr | -13.29% | |
| Technology | Enterprise Software | 682.76Cr | -18.46% | |
| Technology | Enterprise Software | 780.81Cr | -22.66% | |
| Consumer Cyclical | Other Footwear | 1.48TCr | +0.63% | |
| Basic Materials | Gold Mining | 201.15Cr | +15.51% | |
| Consumer Cyclical | Hotels & Motels | 498.23Cr | -8.10% | |
| Healthcare | Other Biotechnology & Medical Research | 1.36TCr | -14.80% | |
| Energy | Photovoltaic Solar Systems & Equipment | 1.61TCr | +24.13% | |
| Industrials | Transaction & Payment Services | 341.88Cr | -17.96% | |
| Healthcare | Bio Therapeutic Drugs | 267.32Cr | -24.16% | |
| Industrials | Other Aerospace & Defense | 14TCr | +12.13% | |
| Industrials | Other Aerospace & Defense | 34TCr | +4.51% | |
| Healthcare | Other Pharmaceuticals | 471.9Cr | -17.71% | |
| Technology | Other Communications & Networking | 4.57TCr | +73.82% | |
| Utilities | Other Electric Utilities | 22TCr | +27.01% | |
| Consumer Non-Cyclical | Cosmetics & Perfumes | 305.96Cr | -20.88% | |
| Consumer Cyclical | Other Appliances, Tools & Housewares | 1.57TCr | -0.48% | |
| Consumer Non-Cyclical | Other Personal Services | 468.69Cr | +15.05% | |
| Technology | Other Communications & Networking | 4.5TCr | +36.20% | |
| Consumer Non-Cyclical | Other Food Retail & Distribution | 735.71Cr | -2.36% | |
| Healthcare | Biopharmaceuticals | 652.84Cr | -9.59% | |
| Healthcare | Other Pharmaceuticals | 431.07Cr | -2.08% | |
| Healthcare | Other Pharmaceuticals | 18TCr | +19.46% | |
| Healthcare | Other Pharmaceuticals | 58TCr | +17.22% | |
| Industrials | Other Aircraft Parts Manufacturing | 10TCr | +23.96% | |
| Technology | Other Communications & Networking | 30TCr | -1.06% | |
| Industrials | Other Aerospace & Defense | 3.67TCr | +54.18% | |
| Industrials | Other Aerospace & Defense | 2.15TCr | +36.55% | |
| Healthcare | Veterinary Drugs | 197.73Cr | +30.57% | |
| Industrials | Other Aerospace & Defense | 926.85Cr | +12.55% | |
| Healthcare | Other Biotechnology & Medical Research | 289.02Cr | +2.19% | |
News of the components
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