The benchmark S&P 500 fell 19% in 2022 for its worst performance since 2008. S&P 500 futures pointed to a solid start to January trading on Tuesday, but the stock market turned red relatively quickly on the first day of 2023 trading.

The S&P 500 was down around 1% through mid-afternoon trading as nearly all of the same worries that led to a turbulent and rough 2022 remain firmly in place. Inflation, higher interest rates, energy market disruptions, and supply chain setbacks have many economists and market participants fearful that the U.S. is headed for a recession in 2023.

Wall Street now waits with increasing impatience on updated corporate earnings guidance for 2023, as well as the latest readings on inflation and consumer spending. Thankfully, the fourth quarter earnings season gets underway in a couple of weeks and December’s CPI figures are due out on January 12.

Some of the selling and choppiness could continue in the near term. Apple, Tesla, and some other market movers continued to drop on Tuesday. The heavy selling pushed the iPhone giant back under the $2 trillion market cap threshold and has it trading at new 52-week lows.

Some of the Apple-specific selling comes on the back of reports that it’s cutting product orders. AAPL is now down 4% in the last two years and it’s approaching some oversold technical levels. This backdrop should see some traders and long-term investors start to nibble at the stock.

It is also worth remembering that slowing earnings and higher interest rates are part of economic cycles. This is why investors with long-term outlooks are likely wise to add to their favorite strong, stable stocks and ETFs in the coming months because market timing is extremely difficult.

Today, we explore how investors can utilize an ROE screen to find stocks that have proven they can turn assets into profits to buy for the early days of 2023 amid ongoing economic and market fears…

ROE

Return on Equity or ROE helps investors understand if a firm’s executives are creating assets with investors’ cash or burning it. ROE shows a company’s ability to turn assets into profits. Put another way, this vital metric measures the profits made for each dollar of shareholder equity.

ROE is calculated as net income / shareholder's equity. For example: if $0.10 of assets are created for each $1 of shareholder equity that would equal a ROE of 10%.

Overall, Return on Equity is a great item to use regardless of what type of investor you are since it provides insight into management’s ability to create value and keep costs under control. Plus, if ROE slips, it can alert us to potential problems.

With all that said, let’s take a look at this screen’s parameters and see the companies proving they can return value to shareholders instead of churning through their cash…

• Zacks Rank equal to 1

The Zacks Rank looks at upward earnings estimate revisions, among other metrics, in order to find companies that are projected to see their earnings get stronger. In fact, beginning with a Zacks Rank #1 can be a great starting point because it boasts an average annual return of over 25% per year during the last 30 years.

• Price greater than or equal to 5

Today we ruled out any stocks that are trading for less than $5 a share because they can be more volatile and speculative.

• Price/Sales Ratio less than or equal to 1

On top of that, we are looking for a low price to sales ratio. Today we went with 1 or below as this range is usually thought to provide better value since investors pay less for each unit of sales.

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

In this screen, we decided to go with companies that brokers are fully on board with since ratings are typically skewed strongly toward ‘buy’ and ‘strong buy.’

• ROE greater than or equal to 10

Lastly, but most importantly for today’s screen, we got rid of any companies with Return on Equity of less than 10 because the median ROE value for all of the stocks in the Zacks Universe is under 10.

Here are two of the seven stocks that made it through today’s screen…

A-Mark Precious Metals, Inc. (AMRK Quick QuoteAMRK - Free Report)

A-Mark Precious Metals is a fully integrated precious metals company that operates through three broader segments: wholesale sales & ancillary services, secured lending, and direct-to-consumer. A-Mark Precious Metals’ offerings include an array of gold, silver, platinum, palladium, and copper bullion, numismatic coins, and beyond. AMRK’s Precious Metals and Jewels industry is currently in the top 7% of over 250 Zacks industries and its dividend yields 2.3%.

The fully integrated precious metals platform company crushed our Q1 fiscal 2023 EPS estimates at the start of November. A-Mark Precious Metals has now topped our EPS estimate for six quarters running and its overall earnings outlook has ripped higher over the past few years. AMRK shares have soared 740% in the past three years to easily outpace its highly-ranked industry’s 570%.

A-Mark Precious Metals continues to look strong during the current inflationary environment and market uncertainty. Plus, all four of the brokerage recommendations Zacks has are “Strong Buys.” And AMRK’s current average Zacks price target offers 50% upside to Tuesday’s levels of around $35 per share.

Build-A-Bear Workshop, Inc. (BBW Quick QuoteBBW - Free Report)

Build-A-Bear Workshop is a well-known seller of stuffed animal toys that boasts roughly 500 interactive brick-and-mortar retail locations. The focus of Build-A-Bear stores is to provide a “hands-on” entertaining experience where consumers help stuff the toys and more. Build-A-Bear also has e-commerce offerings and its expanding portfolio includes entertainment and licensing agreements.

Build-A-Bear’s earnings and revenue outlook is strong for FY22 and FY23. On top of that, its overall earnings outlook for FY22, FY23, and FY24 has continually surged higher over the last few years.

BBW shares have skyrocketed 660% in the last three years. Build-A-Bear also outperformed the market in 2022, finishing the year about 19% higher. Despite the huge run, Build-A-Bear stock, which is trading at around $25 per share at the moment, still has tons of room left to climb before it runs into its average Zacks price target of $33 a share. Even with its strong performance, BBW trades at a huge discount to its industry at 7.5X forward 12-month earnings vs. 18.2X.

Get the rest of the stocks on this list and start looking for the newest companies that fit these criteria. It's easy to do. And it could help you find your next big winner. Start screening for these companies today with a free trial to the Research Wizard. You can do it.

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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.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance/