Stocks with High ROE and Low Trading Volume

02/02/12 -

• In this week’s Macro Mosaic, we included a special study on performance by different ROE and trading volume groupings.  Our analysis showed companies with High ROE (above median) and low trading volume (below median) outperformed all other groups in the long run.  This is not entirely surprising.   We know high ROE stocks tend to outperform.  And, high volume stocks are those that tend to be in favor, and as such, may have premiums built into the stock price.  Today we screen for stocks matching the “high ROE, low volume” criteria.
• Screen criteria: We use stocks between $300mm and $3Bn as our starting universe.  We then examine stocks whose ROE is in the top tertile (top one-third) and whose 1-year average daily dollar volume is in the bottom tertile (bottom one-third).
• 124 stocks pass through the screen, possessing a good sector representation.  27% of companies are Industrial, 15% Financials, 13% Cons Disc and 12% Tech.  Staples, Energy, Health Care and Materials are each 6-8% and Telecom is 3%.