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Zacks.com featured highlights include: Lam Research, Best Buy, T. Rowe Price, Cadence Design Systems and KLA Corporation

Zacks Equity Research
·5 min read

For Immediate Release

Chicago, IL – September 31, 2020 – Stocks in this week’s article are Lam Research Corporation LRCX, Best Buy Co., Inc. BBY, T. Rowe Price Group, Inc. TROW, Cadence Design Systems, Inc. CDNS and KLA Corporation KLAC.

Top 5 ROE Stocks to Profit from the Fed's New Inflation Stance

The U.S. equity markets have its mojo back, courtesy a new inflation strategy by the Fed in order to restore full employment across the country. The historic shift in the Fed stance put more emphasis on boosting employment, while allowing inflation to rise above the pre-determined 2% rate for some time during the period of economic expansion with interest rates kept at near-zero levels.

The central bank aimed to maintain an average inflation rate of 2% rather than keeping it fixed, by offsetting periods when it has been running persistently below 2% with that of the periods for which it ran high. This is expected to encourage banks to keep low interest rates for a longer period of time, likely stimulating economic growth to help tackle rising unemployment.

As investors employ a wait-and-see approach in a classic example of “backing and filling” in the market, they can benefit from ‘cash cow’ stocks that garner higher returns. However, identifying cash-rich stocks alone does not make for a solid investment proposition unless it is backed by attractive efficiency ratios like return on equity (ROE). A high ROE ensures that the company is reinvesting cash at a high rate of return.

Why ROE?

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.

For the rest of this Screen of the Week article please visit Zacks.com at: https://www.zacks.com/amp/stock/news/1048954/top-5-roe-stocks-to-profit-from-feds-new-inflation-stance

Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

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Strong Stocks that Should Be in the News

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.


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Best Buy Co., Inc. (BBY) : Free Stock Analysis Report
 
KLA Corporation (KLAC) : Free Stock Analysis Report
 
Lam Research Corporation (LRCX) : Free Stock Analysis Report
 
T. Rowe Price Group, Inc. (TROW) : Free Stock Analysis Report
 
Cadence Design Systems, Inc. (CDNS) : Free Stock Analysis Report
 
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