Improve Your Portfolio Amidst Fall Volatility With This ROE Stock Filter


Stocks slumped in the second session of the week, with the S&P 500 down 2% and the Nasdaq down 2.8%. Tuesday’s sharp drop comes as Wall Street tries to determine the Federal Reserve’s next moves.

The Fed signaled last week that it could start to slowly reverse its bond buying program as early as November. Meanwhile, the central bank has said it could start raising interest rates by next year. With that in mind, bond yields continued their recent rise. The 10-year US Treasury is hovering near three-month highs at around 1.52%, down from 1.18% it hit in early August.

Some analysts fear the U.S. economic recovery has already peaked, while others point to slowing earnings revisions, rising prices and setbacks in the global supply chain as reasons for caution. The market could remain volatile heading into the fourth quarter and into 2022.

Fortunately, interest rates will likely continue to favor equities. For example, the 10-year US Treasury yield has rarely and barely exceeded 3% over the past decade. And with inflation above 2%, Wall Street will continue to seek returns on stocks.

The market was also expecting a solid pullback or even a correction. And the overall picture of the S&P 500 earnings and margins for 2022 and 2023 remains strong.

Therefore, investors with long-term horizons should try to maintain constant exposure to the market. Today we take a look at how to find top stocks that have been proven to turn assets into earnings amid volatility …


Return on equity, or ROE, helps investors understand whether a company’s executives are creating assets with investor money or burning it. ROE shows a company’s ability to turn assets into profits. In other words, this vital metric measures the profit made for every dollar of equity.

ROE is calculated in net income / equity. For example: if $ 0.10 of assets are created for every $ 1 of shareholders’ equity, that would equate to an ROE of 10%.

Overall, ROE is a great component to use regardless of what type of investor you are, as it provides insight into management’s ability to create value and keep costs under. control. Additionally, if the ROE slips, it can alert us to potential issues.

With that said, let’s take a look at the settings on this screen and see companies prove they can deliver shareholder value instead of spending their cash …

• Zacks rank equal to 1

The Zacks Rank examines upward revisions to earnings estimates, among other metrics, to find companies that should see their earnings improve. In fact, starting with a Zacks Rank # 1 can be a great place to start as he’s showing an average annual return of over 25% per year over the past 30 years.

• Price greater than or equal to 5

Today we have ruled out all stocks that trade below $ 5 per share, as they can be more volatile and speculative.

• Price / sale ratio less than or equal to 1

In addition to that, we are looking for a low price / sales ratio. Today we went for 1 or less as this range is generally considered to provide better value as investors pay less for each unit sold.

•% (Broker) Strong Buy Note equal to 100 (%)

In this screen, we have decided to go with companies that brokers strongly agree with, as the ratings are typically heavily biased towards “buy” and “buy hard”.

• ROE greater than or equal to 10

Last but not least for today’s screen, we got rid of all companies with ROE less than 10 because the median ROE for all stocks in the Zacks universe is lower. to 10.

Here are three actions that have appeared on today’s screen …

Citi Trends, Inc. CTRN

M / I Homes, Inc. MHO

Titan Machinery Inc. TITN

Get the rest of the stock from this list and start looking for the newest companies that match those criteria. It is easy to do. And it could help you find your next big winner. Start researching these companies today with a free trial of the Search Assistant. You can do it.

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Disclosure: Officers, directors and / or employees of Zacks Investment Research may own or have sold securities short and / or hold long and / or short positions in options mentioned in this document. An affiliated investment advisory firm may own or have sold securities short and / or hold long and / or short positions in options mentioned in this document.

Disclosure: Information on the performance of Zacks’ portfolios and strategies can be found at:

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