“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” -Warren Buffett
As the value investor sees the intrinsic value in an under-valued stock, the Growth Investor sees the potential for growth in any asset, regardless of price. These investors usually put their money in younger companies, companies unveiling new innovations, companies with unique and outstanding characteristics or services, or companies that have recently started trading publicly. Either way, the company is on the rise, so it’s best to be disciplined about these investments to see the gains you want.
Growth Investments
Companies are seen as growth stocks for a variety of reasons. They are expected to rise in value and prosper overall. Though their stock price might be lower, or even if it’s already high. Either way, the investor sees potential.
If an entrepreneur or company comes into the market offering some new technology that is seen as a revolutionary breakthrough, it’s likely that they will see success. Likewise, if a business is built on a solid foundation of innovation, stewardship and prudence, they have potential to grow and sustain their business through such service.
How Do I Find Confidence In Growth Investment Choices?
Investors are looking to those who are moving markets forward. Those who innovate. Those who offer opportunities for more growth. The next best thing. The newest product. Companies that reinvest their resources into their business seem to see more growth than others. They’re looking at the assets, much like a value investor.
Not only that, they look for the ones that can sustain their business model. If a company cannot continue with the ever changing market sphere, they will not survive. This is why investors look for credibility in leadership, the company’s history and growth to date. If the entity has been around for a while, it’s seen as a positive as they have a track record- they’ve survived the fluctuations. Looking at current and past perseverance and handling, an investor can find faith in their investment if they see an upward trend.
Are they good at what they do? Do they have what is needed? Do they meet and/or exceed expectations? Are they consistent?
It’s also important to look carefully at the products and services they offer, as well as the market in which they’re in. Innovation is a constant and never ending factor, as well as competition. Their business must last, not only in quality and efficiency, but necessity and popularity. They have to offer the best they can, and strive to out-do their competition.
Will their product(s) be needed many moons from now? Are there other companies who offer similar things? Is it worth it to buy this when a better version comes every year? Are they continuing to come out with new things? Are they adapting to varying target audiences? Again, are they doing it well?
Some Prime Examples
Today with the rise of digital currencies and blockchain technology. Although certain enthusiasts would call it a conversion as opposed to an investment, there’s a growing number of people putting their money into something in which they see tons of potential growth. Folks are noticing the devaluing fiat and the rising value and acceptance of DeFi technology. The growth is right before our eyes.
Amazon is probably the most prime example (no pun intended), from beginning to now. Their business model has always been one of innovation and growth. A company which started off by giving people something they wanted, something convenient, and something not many others were doing. They took all types of product types and mashed them together and formed a one-stop shop online, delivering packages in exponential amounts to this day. They continually invest in smaller businesses, as well as their own company, continually adapting and growing.
Research Is Important
As we always say, research is the most important thing when it comes to this strategy. Long term commitment is a must, though it may not take long to see growth in a trending market. These growth investments often see higher rates of growth, so make sure to be on top of it when they boom!
Knowing the company’s in’s and outs is the most important to any strategy. Where did they come from? What are they doing now? Are they and have they been doing it well? The lens of the growth investor sees all factors, past, present and future. The research never stops and is never limited to your investment choice in a competitive economic environment.
