The broader equity markets’ five-day winning streak was punctured yesterday as oil prices surged amid fears that the proposed Iran-Oman truce agreement will prove to be a false dawn yet again. The market rally was largely driven by a solid broad-based earnings performance across sectors and increased optimism about the reopening of the Strait of Hormuz. With the U.S. President also softening his stance on retaliatory attacks, the markets appeared to be on cruise control.

However, markets tumbled on media reports that the draft truce plan would supposedly ban U.S. and Israeli ships from moving through the key passageway, making the peace agreement appear to be far from being guaranteed. 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, such as return on equity (ROE). A high ROE ensures that the company is reinvesting cash at a high rate of return. Micron Technology, Inc. MU, Arista Networks, Inc. ANET, Broadcom Inc. AVGO, Gartner, Inc. IT and AMETEK, Inc. AME are some of the stocks with high ROE to profit from.

Originally published on zacks.com, part of the BLOX Digital Content Exchange.

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