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5 High ROE Stocks to Buy as Solid Bond Yields Hit Markets
With a steady increase in Treasury yields due to sticky inflation data, the broader U.S. equity market witnessed a downward trajectory over the past few trading days. The benchmark 10-year Treasury yields climbed to their highest levels since November 2023 and hovered in the vicinity of 4.4%, dragging the equity markets down. Investors began to fret about its probable impact on the Federal Reserve's next policy meeting in May, with the odds of a rate cut declining significantly.
The Core Personal Consumption Expenditures (PCE) price index for February was up 0.3% month over month, in line with broad-based expectations. On a year-over-year basis, Core PCE increased 2.8%, way above the Fed's 2% inflation target. Per the Labor Department's latest job report, nonfarm payrolls increased higher than expected to 303,000 in March, signifying robust economic strength. Wages were up 0.3% for the month and 4.1% from a year ago, both in line with estimates.
The solid economic metrics and high inflationary pressures cast doubts over the Fed's proposed rate cuts this year. Despite the federal funds rate level (in the range between 5.25% and 5.50%) being the highest in more than 23 years, the Fed has kept the rates unchanged while pledging to cut the same thrice in 2024. However, the markets appear vulnerable to sudden downtrends owing to tempered expectations and eagerly await further clarity in Fed's next policy meeting.
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. Iron Mountain Inc., MPLX LP, PulteGroup, Inc., Meta Platforms, Inc. and W. R. Berkley Corp. are some of the stocks with high ROE to profit from.
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.
Here are five of the 13 stocks that qualified the screening:
Iron Mountain: Boston, MA-based Iron Mountain provides records & information management services and data center space & solutions in 59 countries. The company primarily generates revenues from storage rental and services. Storage rental revenues are generated through periodic rental charges for data storage. Service revenues comprise charges for related core service activities and a wide array of complementary products and services.
It has a long-term earnings growth expectation of 4%. It delivered a trailing four-quarter earnings surprise of 2.5%, on average. Iron Mountain sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.
MPLX: Findlay, OH-based MPLX is a master limited partnership engaged in providing a wide range of midstream energy services, including fuel distribution solutions. The large-cap partnership was created in 2012 to own, operate and develop midstream energy infrastructures and logistics assets, mostly for its parent company, Marathon Petroleum Corporation.
Apart from oil and natural gas gathering systems, the partnership's midstream assets comprise transportation pipelines for crude, natural gas and refined petroleum products. MPLX also has processing and fractionation facilities for natural gas and natural gas liquids. It delivered a trailing four-quarter earnings surprise of 7.3%, on average. MPLX carries a Zacks Rank #2.
PulteGroup: Based in Atlanta, GA, PulteGroup engages in homebuilding and financial services businesses, primarily in the United States. The company conducts operations through two primary business segments – Homebuilding – which accounts for the lion's share of revenues, and Financial Services.
PulteGroup has a long-term earnings growth expectation of 12.7% and delivered a trailing four-quarter earnings surprise of 15.1%, on average. This Zacks Rank #2 stock has a VGM Score of A.
Meta: Headquartered in Menlo Park, CA, Meta is the world's largest social media platform. The company's portfolio offering evolved from a single Facebook app to multiple photo and video-sharing apps like Instagram and WhatsApp through acquisitions.
The company has a long-term earnings growth expectation of 19.5% and delivered a trailing four-quarter earnings surprise of 19.7%, on average. Meta carries a Zacks Rank #2.
W. R. Berkley: Founded in 1967 and based in Greenwich, CT., W.R. Berkley is one of the nation's largest commercial lines property casualty insurance providers. The company offers a variety of insurance services, from reinsurance to workers comp third-party administrators.
It has a long-term earnings growth expectation of 9% and delivered a trailing four-quarter earnings surprise of 4.1%, on average. It has a VGM Score of B. Currently, W.R. Berkley carries a Zacks Rank #2.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
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.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
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. See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks.com featured highlights include Iron Mountain, MPLX, PulteGroup, Meta Platforms and W. R. Berkley
For Immediate Release
Chicago, IL – April 10, 2024 – Stocks in this week’s article are Iron Mountain Inc. (IRM - Free Report) , MPLX LP (MPLX - Free Report) , PulteGroup, Inc. (PHM - Free Report) , Meta Platforms, Inc. (META - Free Report) and W. R. Berkley Corp. (WRB - Free Report) .
5 High ROE Stocks to Buy as Solid Bond Yields Hit Markets
With a steady increase in Treasury yields due to sticky inflation data, the broader U.S. equity market witnessed a downward trajectory over the past few trading days. The benchmark 10-year Treasury yields climbed to their highest levels since November 2023 and hovered in the vicinity of 4.4%, dragging the equity markets down. Investors began to fret about its probable impact on the Federal Reserve's next policy meeting in May, with the odds of a rate cut declining significantly.
The Core Personal Consumption Expenditures (PCE) price index for February was up 0.3% month over month, in line with broad-based expectations. On a year-over-year basis, Core PCE increased 2.8%, way above the Fed's 2% inflation target. Per the Labor Department's latest job report, nonfarm payrolls increased higher than expected to 303,000 in March, signifying robust economic strength. Wages were up 0.3% for the month and 4.1% from a year ago, both in line with estimates.
The solid economic metrics and high inflationary pressures cast doubts over the Fed's proposed rate cuts this year. Despite the federal funds rate level (in the range between 5.25% and 5.50%) being the highest in more than 23 years, the Fed has kept the rates unchanged while pledging to cut the same thrice in 2024. However, the markets appear vulnerable to sudden downtrends owing to tempered expectations and eagerly await further clarity in Fed's next policy meeting.
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. Iron Mountain Inc., MPLX LP, PulteGroup, Inc., Meta Platforms, Inc. and W. R. Berkley Corp. are some of the stocks with high ROE to profit from.
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.
Here are five of the 13 stocks that qualified the screening:
Iron Mountain: Boston, MA-based Iron Mountain provides records & information management services and data center space & solutions in 59 countries. The company primarily generates revenues from storage rental and services. Storage rental revenues are generated through periodic rental charges for data storage. Service revenues comprise charges for related core service activities and a wide array of complementary products and services.
It has a long-term earnings growth expectation of 4%. It delivered a trailing four-quarter earnings surprise of 2.5%, on average. Iron Mountain sports a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here.
MPLX: Findlay, OH-based MPLX is a master limited partnership engaged in providing a wide range of midstream energy services, including fuel distribution solutions. The large-cap partnership was created in 2012 to own, operate and develop midstream energy infrastructures and logistics assets, mostly for its parent company, Marathon Petroleum Corporation.
Apart from oil and natural gas gathering systems, the partnership's midstream assets comprise transportation pipelines for crude, natural gas and refined petroleum products. MPLX also has processing and fractionation facilities for natural gas and natural gas liquids. It delivered a trailing four-quarter earnings surprise of 7.3%, on average. MPLX carries a Zacks Rank #2.
PulteGroup: Based in Atlanta, GA, PulteGroup engages in homebuilding and financial services businesses, primarily in the United States. The company conducts operations through two primary business segments – Homebuilding – which accounts for the lion's share of revenues, and Financial Services.
PulteGroup has a long-term earnings growth expectation of 12.7% and delivered a trailing four-quarter earnings surprise of 15.1%, on average. This Zacks Rank #2 stock has a VGM Score of A.
Meta: Headquartered in Menlo Park, CA, Meta is the world's largest social media platform. The company's portfolio offering evolved from a single Facebook app to multiple photo and video-sharing apps like Instagram and WhatsApp through acquisitions.
The company has a long-term earnings growth expectation of 19.5% and delivered a trailing four-quarter earnings surprise of 19.7%, on average. Meta carries a Zacks Rank #2.
W. R. Berkley: Founded in 1967 and based in Greenwich, CT., W.R. Berkley is one of the nation's largest commercial lines property casualty insurance providers. The company offers a variety of insurance services, from reinsurance to workers comp third-party administrators.
It has a long-term earnings growth expectation of 9% and delivered a trailing four-quarter earnings surprise of 4.1%, on average. It has a VGM Score of B. Currently, W.R. Berkley carries a Zacks Rank #2.
You can get the rest of the stocks on this list by signing up now for your 2-week free trial to the Research Wizard and start using this screen in your own trading. Further, you can also create your own strategies and test them first before taking the investment plunge.
The Research Wizard is a great place to begin. It's easy to use. Everything is in plain language. And it's very intuitive. Start your Research Wizard trial today. And the next time you read an economic report, open up the Research Wizard, plug your finds in, and see what gems come out.
Click here to sign up for a free trial to the Research Wizard today.
For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/stock/news/2252425/5-high-roe-stocks-to-buy-as-solid-bond-yields-hit-markets
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.
About Screen of the Week
Zacks.com created the first and best screening system on the web earning the distinction as the "#1 site for screening stocks" by Money Magazine. But powerful screening tools is just the start. That is why Zacks created the Screen of the Week to highlight profitable stock picking strategies that investors can actively use.
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. See these high-potential stocks free >>.
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Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Contact: Jim Giaquinto
Company: Zacks.com
Phone: 312-265-9268
Email: pr@zacks.com
Visit: https://www.zacks.com/
Zacks.com provides investment resources and informs you of these resources, which you may choose to use in making your own investment decisions. Zacks is providing information on this resource to you subject to the Zacks "Terms and Conditions of Service" disclaimer. www.zacks.com/disclaimer.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.