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Author: mungofitch Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 222507  
Subject: Re: Influence on ROE in Investing returns Date: 10/5/2012 2:32 PM
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Returns Jan 1997 to date for all 1700 companies covered by Value Line.
Using current ROE, not 10 year average ROE, so not as good a metric as yours.
Though these numbers change pretty slowly, this is based on checking to
ensure that your firm in still in its bucket every month, no trading costs.
Figures include dividends.

top 3% by ROE = 14.65%/year (about 50 stocks)
next 7% by ROE = 12.77%/year
next 10% by ROE = 10.70%/year
next 20% by ROE = 11.52%/year
next 20% by ROE = 11.07%/year
next 20% by ROE = 10.53%/year
next 10% by ROE = 10.25%/year
next 5% by ROE = 5.33%/year
Bottom 5% by ROE = 2.33%/year

If you take just the best 3% bucket above and buy the 5 stocks with the highest 5
year growth in book value per share the average return is 22%/year.
(though at that point trading costs become an issue)
You can see how it's easy to become a quant.

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