Online Journal for the Moose Pond Investors Club

Return on Equity Screen

There seems to be a correlation between stocks that have a good return on equity (ROE) year after year and quality growth stocks.

Here is a screen using AAII SI Pro with the following parameters:
   – ROE for each of the last seven years > 15%
   – Current PE < 5-year average PE    - (PE / EPS growth) < 1.5    - 5-year (diluted) EPS growth > 10%
   – Projected long term EPS growth > 10%
   – positive EPS growth for each of last 4 quarters

Using data from October 8, the screen yielded 22 stocks.

17 of the 22 stocks have an U/D ratio > 3.0, total return > 15%, and a relative value < 110. In an equally weighted portfolio, all of these stocks together would have a total return of 20.1%, a PAR of 15.1%, an U/D ratio of 4.7, and a relative value of 89.1. The attached PDF file contains a PERT chart (sorted by total return) and a trend report (sorted by PAR) with the stocks passing the screen. The PERT chart uses First Call data for projected EPS and 5-year growth.

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