Growth investors look at a company in relation to its industry, competition, and especially its market. They try to estimate future prospects for a company and hence its ability to increase earnings. This approach to investing requires greater analytical emphasis on industry and consumer trends. Growth-oriented stock funds will often have portfolios with higher-than-average price/earnings and price/book values ratios. Most rapidly growing companies pay little or no dividends. That’s because they need all the cash they can get for expansion. So growth-oriented funds frequently have lower-than-average dividends. Plus, growth funds will tend to invest in smaller companies. After all, smaller, newer companies often have far greater growth potential than do older, larger companies.
The Investment Reporter •July 15, 2015 •
Underpriced slower-growing companies are often better investments than overpriced fast-growing companies. In other words, value investing often pays more than growth investing.
Jeremy Siegel is a professor Read More
