We’ve long argued (and proven empirically) that there is a strong correlation between improving return on invested capital (ROIC)[1] and increasing shareholder value. Nevertheless, the majority of mutual fund managers continue to pick stocks using accounting-based metrics such as price-to-earnings ratios, return on equity, or accounting book value.

We analyze[2] these metrics for all the holdings of over 7,500 U.S. ETFs and mutual funds daily to identify which fund managers put their analytical money where their mouth is. Occasionally, we come across a fund whose managers look beyond accounting earnings in their investment strategy.

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