1. Only 6 out of 1000 had ROE > 30% during previous decade
In its 1988 Investor's Guide issue, Fortune reported that among the 500 largest industrial companies and 500 largest service companies, only six had averaged a return on equity of over 30% during the previous decade. The best performer among the 1000 was Commerce Clearing House at 40.2%.
(Comment: 6 in 1000 is 0.6%)
2. Only 25 of 1,000 companies had average ROE > 20% and no year with ROE < 15%, in last 10 years.
This Fortune study also mentioned that only 25 of the 1,000 companies met two tests of economic excellence -
- an average return on equity of over 20% in the ten years, 1977 through 1986, and
- no year worse than 15%.
- First, most use very little leverage compared to their interest-paying capacity. Really good businesses usually don't need to borrow.
- Second, except for one company that is "high-tech" and several others that manufacture ethical drugs, the companies are in businesses that, on balance, seen rather mundane. Most sell non-sexy products or services in much the same manner as they did ten years ago (though in larger quantities now, or at higher prices, or both).