There is no silver bullet for finding stocks that are guaranteed to outperform the markets in the short or long term. Still, these stellar companies often have key characteristics that set them apart from the crowd. While there is yet to be any guaranteed way of identifying these above average stocks, we had an idea or two on how to potentially improve the odds.
We ran a screen for companies that have consistently outperformed the market over the last five years. From this pool we screened for low-risk companies (Beta less than 1) that have a high return on equity (X>30%). We did not screen out any sectors. The list below is sorted from highest to lowest by the earnings growth rate.
Colgate Palmolive (CL)
Sector | Consumer Goods |
Industry | Personal Products |
Market Cap | $40.94B |
Beta | 0.54 |
Analyst Sentiment | 19/26 List-Hold/Neutral (Neutral) |
From Colgate to Softsoap to Speed Stick to Ajax, Colgate-Palmolive is a leading provider of things that make you and your home clean. The firm’s annual return on equity is 82.11%. CL’s five-year return is +44.0% compared to the S&P 500’s (SPY) return of 6.33% over the same period. In the last month, CL has lost 4.25% in value. The short interest for CL is 1.30% as of July 15.
Altria Group (MO)
Sector | Consumer Goods |
Industry | Cigarettes |
Market Cap | $53.62B |
Beta | 0.48 |
Analyst Sentiment | 8/13 List-Hold/Neutral (Neutral) |
The parent company of Philip Morris USA, Altria controls much of the U.S. tobacco market with Marlboro, Parliament, and other brands. The firm’s annual return on equity is 75.21%. MO’s five-year return is +40.0% compared to the S&P 500’s return of 6.33% over the same period. In the last month, MO has lost 4.11% in value. The short interest for MO is 1.10%as of July 15.
Yum Brands (YUM)
Sector | Services |
Industry | Restaurants |
Market Cap | $23.55B |
Beta | 0.87 |
Analyst Sentiment | 10/ List-Hold/Neutral (Neutral) |
Yum Brands is the company behind quick-service restaurants such as A&W, KFC, Long John Silver's, Pizza Hut, and Taco Bell. The firm’s annual return on equity is 70.58%. YUM’s five-year return is +115.8% compared to the S&P 500’s return of 6.33% over the same period. In the last month, YUM has lost 8.77% in value. The short interest for YUM is 0.80% as of July 15.
International Business Machines (IBM)
Sector | Technology |
Industry | Diversified Computer Systems |
Market Cap | $206.59B |
Beta | 0.69 |
Analyst Sentiment | 26/29 List- Buy/Outperform (Bullish) |
The company is a globally integrated innovation company, serving the needs of enterprises and institutions worldwide. The firm’s annual return on equity is 64.01%. IBM’s five-year return is +127.9% compared to the S&P 500’s return of 6.33% over the same period. In the last month, IBM has lost 1.98% in value. The short interest for IBM is 1.50% as of July 15.
Accenture (ACN)
Sector | Services |
Industry | Management Services |
Market Cap | $36.87B |
Beta | 0.79 |
Analyst Sentiment | 17/20 List- Buy/Outperform (Bullish) |
The company is a management consulting, technology services and outsourcing organization. The firm’s annual return on equity is 62.92%. ACN’s five-year return is +98.4% compared to the S&P 500’s return of 6.33% over the same period. In the last month, ACN has lost 9.82% in value. The short interest for ACN is 3.10% as of July 15.
Kellogg (K)
Sector | Consumer Goods |
Industry | Processed & Packaged Goods |
Market Cap | $19.32B |
Beta | 0.87 |
Analyst Sentiment | 10/23 List-Hold/Neutral (Neutral) |
The company and its subsidiaries are engaged in the manufacture and marketing of ready-to-eat cereal and convenience foods. The firm’s annual return on equity is 57.57%. K’s five-year return is +10.5% compared to the S&P 500’s return of 6.33% over the same period. In the last month, K has lost 4.25% in value. The short interest for K is 1.70% as of July 15.
Netflix (NFLX)
Sector | Services |
Industry | Music & Video Stores |
Market Cap | $12.67B |
Beta | 0.33 |
Analyst Sentiment | 12/31 List- Hold/Neutral (Slightly Bearish) |
Netflix delivers its comprehensive library of movies and TV shows online and through the mail in its ubiquitous red envelopes. The firm’s annual return on equity is 55.44%. NFLX’s five-year return is 1050.32% compared to the S&P 500’s return of 6.33% over the same period. In the last month, NFLX has lost 6.04% in value. The short interest for NFLX is 19.40% as of July 15.
Gilead Sciences (GILD)
Sector | Healthcare |
Industry | Biotechnology |
Market Cap | $29.32B |
Beta | 0.36 |
Analyst Sentiment | 13/28 List- Buy/Outperform (Bullish) |
A biopharmaceutical company that discovers, develops and commercializes innovative therapeutics in areas of unmet medical need. The firm’s annual return on equity is 47.20%. GILD’s five-year return is 20.87% compared to the S&P 500’s return of 6.33% over the same period. In the last month, GILD has lost 11.55% in value. The short interest for GILD is 1.10% as of July 15.
TJX (TJX)
Sector | Services |
Industry | Department Stores |
Market Cap | $20.35B |
Beta | 0.73 |
Analyst Sentiment | 15/27 List- Buy/Outperform (Bullish) |
The company is an off-price retailer of apparel and home fashions in the US and worldwide. Its T.J. Maxx, Marshalls and A.J. Wright chains in US, Winners chain in Canada and T.K. Maxx chain in Europe sells off-price family apparel and home fashions. The firm’s annual return on equity is 43.21%. TJX’s five-year return is 155.18% compared to the S&P 500’s return of 6.33% over the same period. In the last month, TJX has lost 4.7% in value. The short interest for TJX is 3.10% as of July 15.
We hope this helps investors as they do their own homework and due diligence on companies that operate a low risk profile and continue to generate a spectacular ROE.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
