No. of Recommendations: 12
Hi Jim (mungofitch),
I know you have regularly pointed to ROE as one of the best "single factors" to pick good stocks. I am just wondering in any of your backtests, have you ever tested an average ROE (like average of the last 2, 3 or 5 years) rather than just using TTM ROE or last Financial Year ROE.
The reason I ask is that I scaped ROE from Marketwatch for the 100 stocks in the Nasdaq 100 (I don't think they liked this as I think they may have blacklisted my IP address now). Anyway, the highest ROE stock I identified was Verisk Analytics Inc (Ticker: VRSK). But looking at say
https://www.morningstar.com/stocks/xnas/VRSK/key-m... here is the ROE in recent years along with Total Equity:
Year ROE Tot. Equity
2025 444.05% 309.8
2024 466.96% 105
2023 59.67% 322.2
2022 41.78% 1767.7
2021 24.16% 2842.5
2020 28.74%
2019 20.77%
2018 29.97%
2017 34.08%
2016 43.72%
It sort of looks like the high ROE is the result of a significant drop in Equity. I didn't look into what caused the drop in Equity, but I was wondering if there was any backtest evidence to support the use of some sort of average ROE rather than a single year that might reduce the impact of any anomolies.
Kind Regards
StevnFool
