Growth Investing

Defining Growth Investing

• Roughly, a growth investor looks for stocks they believe are undervalued based on their potential worth
• Implying, a growth investor seeks businesses trading at a share price that probably isn't a bargain right now, but is expected to be a bargain in the future
• They believe the company's revenues, cash flows, and profits are expected to grow much faster eventually

Defining Properties of Growth Stocks

• Sometimes, growth stocks are more expensive

  • Since, sometimes their stock prices are high relative to their sales or profits
  • This is due to expectations from investors of higher sales or profits in the future
  • So, we expect to see high P/E ratios

• Often, growth stocks are riskier

  • In the moment, they're expensive because investors expect high future earnings
  • If growth plans don't materialize, the price could plummet

References

• Wiki about Growth Investing
• Article Comparing Growth and Value Investing