Investing usually consists of two schools of thoughts:
Value Investing and Growth Investing
1. Value Investing (Bargain Investing) is buying a stock that is under-valued by marketplace. This type of investing is ruled by Benjamin Graham, David Dodd, Warren Buffett.
2. Growth Investing (Next big change) is buying a stock that is the next big thing or the next trend, like Electric Cars, Green Energy etc. This type of industry is ruled by Phil Fisher, Thomas Rowe Price Jr, William O’Neil.
Growth Investing is said to have an edge over Value Investing
Best Examples of Growth-Investing are:
1. Microsoft (From 50 cents in 1990 to 30$ in 1999 : 5900%) – It started as an operating system and then dominated the market with software and hardware.
2. Starbucks (From 3$ in 2000 to 17$ in 2006 : 433%) – It brought a new coffee culture in US specially in Wall Street.
3. Amazon (From 120$ in 2010 to 1000$ in 2016 : 880%) – It has been a growth stock since inception, dominating the retail market and becoming a conglomerate giant. Stocks that have high potential as Growth stocks: 1. Tesla
2. Adani Green
3. AMD
Parameters to check for a growth stock:
CAN SLIM system coined by J’O Neil
Current Quarterly Earnings (should have at least 25% EPS) Annual Earnings Growth (EPS of 25-50% in the past 3-5 years)
New Product, Services and Reinvention (How the company reinvents and much money is invested in R&D)
Supply and Demand (How is the supply chained and how is demand pulled)
Leader or Laggard (If the company is leading in its industry)
Institutional Sponsorship (How many MF, FII, DII are invested and how much do the promoters hold)
Market Direction (The flow of the stock with its competitors, if the rise and fall is mirrored)
Many softwares have been developed to understand a potential growth stock / under-valued stock and over-valued stock, using these several investors automate their trades and watch their money grow while they sit-back and work in other directions.
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