Goldman picks 50 top return-on-equity stocks for a tough ROE year
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Return on equity for the broader market has been lackluster for the past three quarters and this year will likely see drop in median S&P 500 (SP500) (NYSEARCA:SPY) ROE, according to Goldman Sachs. 
"An upwards inflection in S&P 500 ROE will be difficult to achieve in 2023, as headwinds from a higher cost of capital and higher taxes will place further strain on profitability," equity strategist David Kostin wrote in a note.
Goldman is rebalancing its ROE growth basket, which outperformed S&P 500 ROE by 10 percentage points in 2022.
The basket "is sector neutral to the S&P 500 and contains 50 stocks with the highest consensus-expected ROE growth during the next 12 months," Kostin said. "The median stock in the basket is expected to grow ROE in the next 12 months by 12% vs. -6% for the median S&P 500 company."
The stocks in the growth basket by sector are:
Communication Services (XLC)

Take-Two (TTWO), ROE last 12 months 11%, consensus ROE growth 22%, new addition
Disney (DIS), 7%, 12%
Activision Blizzard (ATVI), 12%, 11%, new add

Consumer Discretionary (XLY)

Target (TGT), 27%, 49%, new add
Aptiv (APTV), 11%, 30%
Nike (NKE), 29%, 29%
Dollar General (DG), 42%, 14%, new add
Chipotle (CMG), 39%, 12%

Consumer Staples (XLP)

Keurig Dr Pepper (KDP), 9%, 3%, new add
PepsiCo (PEP), 49%, 3%, new add
Mondelez (MDLZ), 15%, 3%, new add
Conagra (CAG), 14%, 2%, new add

Energy (XLE)

EQT (EQT), 10%, 43%, new add
SLB (SLB), 17%, 19%
Halliburton (HAL), 24%, 12%

Financials (XLF)

Wells Fargo (WFC), 7%, 48%, new add
Bank of New York Mellon (BK), 7%, 40%, new add
M&T Bank (MTB), 9%, 39%
Progressive (PGR), 15%, 37%
AIG (AIG), 8%, 28%
Arch Capital (ACGL), 12%, 17%, new add

Materials (XLB)
Corteva (CTVA), 7%, 19%
Healthcare (XLV)

Incyte (INCY), 9%, 39%, new add
DexCom (DXCM), 15%, 24%
Bio-Techne (TECH), 22%, 19%, new add
Becton, Dickinson (BDX), 13%, 5%
Edwards Lifesciences (EW), 24%, 4%
Baxter International (BAX), 16%, 3%, new add
Boston Scientific (BSX), 14%, 3%
Universal Health Services (UHS), 12%, 2%

Industrials (XLI)

Verisk Analytics (VRSK), 45%, 15%, new add
CoStar Group (CSGP), 7%, 13%, new add
Equifax (EFX), 23%, 11%
Johnson Controls (JCI), 13%, 10%

Info Tech (XLK)

SolarEdge (SEDG), 12%, 49%
Ceridian HCM (CDAY), 5%, 38%, new add
Nvidia (NVDA), 38%, 16%
Juniper Networks (JNPR), 14%, 9%
Salesforce (CRM), 8%, 8%
Corning (GLW), 15%, 7%
Roper Technologies (ROP), 11%, 6%, new add
Global Payments (GPN), 11%, 5%
Broadcom (AVGO), 71%, 4%
PayPal (PYPL), 22%, 3%, new add
Analog Devices (ADI), 14%, 2%
DXC Technology (DXC), 17%, 1%, new add
AMD (AMD), 10%, 1%, new add

Real Estate (XLRE)
Essex Property Trust (ESS), 6%, 29%, new add
Utilities (XLU)

Constellation Energy (CEG), 8%, 49%
PPL (PPL), 7%, 10%, new add

See why UBS expects earnings growth to stall.