Growth stocks generally present a steady increase in value year after year. They may provide generous returns as long as the period of growth continues. A growth stock investor may set her sights on companies with aggressive increases in earnings. Growth stocks have a tendency to increase ones portfolio value at a faster rate. For example, companies with growth of 20 percent annually will double in value every 4 years.
Investors may find stocks with high growth potential by paying attention to current trends. A new shoe designer, video game, or electronic device could prove to be the next big thing. Knowing when to get off the ride is as important as when to get on. Growth stocks can provide steady returns while providing products that are in constant demand. The investor will need to pay attention to the growth stock’s quarterly and annually performance. If the growth stock falls out of favor with the markets, it may be time to sell.
Growth stocks showing aggressive annual increases will have the following characteristics:
Have good financial strength
Low labor cost
Their products are in high demand
Dominate their industry
Provide investors a high rate of return on equity