Watch Return on Equity Closely

Let me begin with a silly question: why invest in stocks? The trained answer is "to make money." Fair enough, making money is one thing; actually doing it is another. The way to make money in stocks is to pick businesses that deliver positive returns. Businesses deliver positive returns when they, too, invest successfully and earn attractive returns on invested capital and return on equity.

The math is glaring simple: a company has $100 of equity capital and uses that capital to earn $15 in profit. Return on equity capital is 15%. If the valuation ratios remain the same, then the stock price will deliver a 15% return. Over time continued attractive return on equity should continue to deliver an attractive return on the stock price. We know that leverage amplifies return on equity during good times....455 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.