Growth Stocks
Growth stocks are the glamour investments on Wall Street.
With the dominant performance of mega-cap tech stocks, growth stocks are also the best-performing stocks in the market today, having dramatically outpaced value stocks for the last decade. Growth stocks aren’t all tech companies, they run the gamut from up-and-coming consumer brands or fast-expanding restaurants to the cutting edge of biotech and technology.
We highlight some of our favorite growth stocks in our FREE REPORT on the 5 Best Stocks to Buy every month.
Of course, there’s a caveat to investing in these stocks. Unlike time-tested dividend stocks or bargain-basement value plays, these stocks carry plenty of risk. The companies are less mature, have smaller margins, and typically don’t pay a dividend. Thus, the stocks can be very volatile, especially around earnings season.
For many investors, however, the risks of investing in these stocks are worth the potential rewards. Apple (AAPL), Amazon (AMZN), Netflix (NFLX)—all of them started off as growth stocks before they became some of the best-performing and most coveted stocks on the market. Those who got in early earned triple-digit, even quadruple-digit, returns.
There are several keys to finding the right growth stocks:
- Invest in fast-growing companies. It’s a rather obvious prerequisite. But it’s important to know what fast-growing means. It means investing in fast-growing industries, where revolutionary ideas and services are being created. Any little-known stock that provides a product that is essential to that budding industry makes for a good growth stock.
- Buy stocks that are outperforming the market. Companies can promise all kinds of financial growth. But is that growth potential translating to a rising share price? The best investing tips come from the performance of the stocks themselves.
- Use only the best market timing indicators. Never underestimate the power of the market to move stocks. You don’t want to invest in a growth stock just as the market is plummeting. If you’re in a bull market, you can afford to be aggressive in buying stocks that are more speculative.
- Be patient. Not every growth stock will make you rich overnight. Very few will, in fact. Even Apple took years before it morphed into the biggest technology behemoth in the world. In the investment world, time is your friend. If you get out of a stock too early, you may miss out on some big gains months down the road.
Growth stocks were the basis upon which Cabot Wealth Network was founded in 1970. Our founder, Carlton Lutts, gave up a career in engineering to pursue his passion for stock selection and market timing.
More than half a century later, we’re much more than a growth investing advisory. But growth stocks—and helping individual investors earn big profits from them—are still at the heart of what we do via our flagship advisory, Cabot Growth Investor.
Investing in these stocks can be tricky. Finding a hidden gem that has yet to be fully discovered by the market is simultaneously exciting and frustrating. Look for up-trending earnings growth, improving profit margins, and booming industries. If done right, investing in growth stocks can be both highly satisfying and highly profitable.
And we’re here to help!
