Growth shares should be the first area for the private investors to specialize. Growth shares have the ability to increase earnings progressively at an above average rate year after year. The sectors to find growth stocks include; the pharmaceuticals, breweries, healthcare, pubs and restaurants, media, general retailers, support services and other financial. Although all companies are affected by the state of economy, growth companies are the least vulnerable. The operation principle behind the growth stock is that the company pays very low or no dividends and reinvests its earnings for expansion. By reinvesting the profits the company grows faster and its long- term trading delivers greater earnings above slippage and commissions.
They are growth stock because they increase their intrinsic value which forces its stock prices to increase. These companies have not yet reached their saturation point in the market and therefore more often they introduce new products or expand. The secret of investing in growth stock is buying and holding. It may look simple but their shares outperform the market by a wide margin. Daily prices of the growth stock are of no importance to the experienced investor. Professionals make money by extracting information from the market and finding out whether the bulls or the bears are in control.
Investing is more than buying; it’s a case of knowing and acting on good market indicators. Professional investors invest on businesses that they understand usually those that they are competent in. look for a business that has a consistent operating history and which has a clear-cut long term prospects. An investor should focus on companies which have high returns on capital and those with high profit margins. The only time trading in stocks is risky is when the investor doesn’t know what he is doing. Philosophies of trading will come and go but your investment policy is yours to keep.