Several stocks, including PepsiCo to Expedia , can provide steady returns and earnings growth in the face of greater volatility, according Wolfe Research. A hotter-than-anticipated inflation reading on Tuesday sparked a sell-off that led the Dow Jones Industrial Average to decline 1%, its worst loss since March 2023. The S & P 500 and Nasdaq Composite also retreated more than 1% on the day. Against this backdrop, investors may want to keep their eyes on stocks that reliably deliver strong returns. Wolfe Research screened for companies with a history of strong returns — as gauged by return on equity and return on capital employed — along with consistent earnings growth. Specifically, Wolfe searched for names with: ROE in the top 40% of the firm’s universe of stocks Three-year average EPS growth of more than 6% EPS expected to grow by more than 6% over the next two years Low short interest Take a look at some of the stocks that made the cut: Big-box retailer Costco is one of the retailers that continues to post strong gains. Shares are up nearly 9% so far this year, and have gained more than 42% over the past 12 months. According to Wolfe Research analysts, the company has an ROCE, or return on capital employed, of 27%. Costco has been a recent favorite among analysts. On Thursday, UBS maintained its buy rating and adjusted its price target on Costco by $100 to $825, saying the membership warehouse continues to “execute at a high level and take market share” despite slower consumer demand. Goldman Sachs thinks Costco could be primed for a “new strategic era” after the retailer announced a new chief financial officer on Feb. 6 for the first time in 40 years. “We see a new external hire possibly bringing in ideas based on previous experience which could include a focus on building out the company’s digital, media and/or fulfillment businesses,” Goldman analyst Kate McShane wrote in a Feb. 9 note, adding that these “alternative businesses” could be the future for those selling groceries. Her $749 price target on the buy-rated shares suggests 15.5% upside potential. Travel company Expedia has a current ROCE of 42% and projected ROCE of 101% over the next 12 months, according to Wolfe Research. Shares took a nosedive after Expedia said it expected revenue growth to falter this year due to softened air fares since pandemic highs. The company posted worse-than-expected bookings for the fourth quarter and a CEO transition plan, despite beating earnings and…
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