For Immediate Release
5 Top ROE Stocks to Buy as Trump Flip-Flops on Trade War
The U.S. equity markets seem to be bracing up for another roller-coaster ride after President Donald Trump flip-flopped on his trade policy with China and renewed threats to impose 25% tariffs on $50 billion worth of Chinese goods to retaliate against unfair trade practices. The volte-face could derail the trade negotiations between the two warring countries, reducing United States' negative balance of trade, as China vouched to counter the move with similar trade restrictions.
Although overall markets recovered from a sudden steep sell-off triggered by Italy's political crisis (which threatened the stability of the eurozone) as two anti-establishment parties renewed efforts to form a government, domestic trade concerns appear far from over.
As investors employ a wait-and-see approach in a classic example of "backing and filling" in the market, they could benefit from 'cash cow' stocks that garner higher returns.
However, singling out cash-rich stocks alone does not make for a solid investment proposition unless they are backed by attractive efficiency ratios like return on equity (ROE). A high ROE ensures that the company is reinvesting its cash at a high rate of return.
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 stocks 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.
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