That might make some investors think about. But Jared Woodard, head of Bank of America's research investment committee, is focused on another aspect of spending. He's developed a way to find the companies that are most effective at taking that spending and turning it into revenue.
Woodard and company are isolating the companies whose revenue growth over the last eight years can best be explained by three types of spending: Capital equipment; selling, general and administrative; and research and development. Not surprisingly, the very best stocks by that measure are doing extremely well. Their top nine stocks have returned an average of 60.4% over the past year. The Russell 3000 index is up about 7% over that period.
"Regardless of the policy environment, history shows strong outperformance for the stocks of companies that show a strong link between higher capex or R&D and higher revenue. It tends to be an all-weather market theme," he said. Here are Woodard's top nine stocks as measured by the revenue returns they're generating on investments in their business. All nine have "Buy" ratings from Bank of America. They're ranked from lowest to highest based on how much of that revenue is attributable to the research investments they've made.
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