A Growth Investing Strategy

By Stock Research Pro • September 22nd, 2008

Growth investing is a major school of investment theory that focuses on investing in companies that have demonstrated a track record of high or emerging growth.

Growth investing is about finding stocks that have stronger sales and earnings growth than the underlying market. It is based on qualitative judgments about companies with extraordinary growth rates. This is a longer-term approach, typically requiring more than 1 year of holding these stocks. Growth investing is often more art than science as there is no surefire way to spot these companies.

Growth investors seek to find profitable companies with strong recent sales and earnings growth. It is the idea that you should buy stock in companies whose potential for growth in sales and earnings is excellent. Growth investing is a style that selects stocks of companies with rapid earnings and revenue growth that is expected to continue in the future. Growth investors are especially looking for companies that have accelerating earnings which are ahead of their industry group.

Growth stocks tend to have higher P/E ratios, pay little or no dividends and have a beta above 1.

While growth investing is a style that seeks to identify tomorrow’s great business successes, many say that growth investors often fall victim to group-think and herd mentality.

Growth investing is generally considered more aggressive than “value investing”, the second of the two most common strategies.

More about growth investing


The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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