Successful investing in growth stocks is, as any fule kno, difficult. The whole of FinTwit may tell you it’s easy, but they are lying to you. Fortunately, help is at hand. Here we explain our own methods, some or all of which you may wish to factor into your own work. We make no claim to genius or to guru status, but we do eat our own cooking in our published work, and thus far, we have dined well. Read on!
We’re Not Proud.
Lately we’ve been flattered by many very kind words in the comments to our free research notes - in addition to the consistently great reviews we get for our subscription services Growth Investor Pro
and Space Select.
We’re happy our members and our readers are happy. But in truth all we are doing is explaining our methods and sharing the ideas arising from those methods - the ideas we use to invest our own staff personal accounts.
A Guru-Free Zone.
Investing as you know attracts more than its fair share of wannabe gurus; you’ll know one when you see one, insofar as the one thing they won’t share with you is their workings-out, the explanations of why they think their methods and conclusions are correct, and still less will they be prepared to engage and actually debate those things with you. “My way or the highway” is the refrain of the guru. If you see that kind of thing when you’re reading folks’ investment ideas? We suggest you take the highway. Because you are a lot smarter than you think you are - if you give yourself the chance to be.
Everyone Tells You This Stuff Is Too Difficult For You.
Check in on FinTwit sometime - everyone’s a genius, right? Fancy charts, commentary, “insight”, whatever. All designed to convey one thing - the Tweeter is very clever and/or clued-in, and you aren’t. Follow!
But here’s the thing about investment research methods: they aren’t at all difficult at their core. Yes, you might have to think a little, and in some cases the logic seems upside down at first, until you realize it’s usually Opposite Day on most days of most weeks in most markets. But if you can do basic math, if you can count to 5 and know your A-B-C, if you can keep reminding yourself that the stock and the underlying company are different things, and most importantly at all if you can leave your emotion at the door, avoiding thinking of a stock as a living thing but rather just a number on a screen that might go up, down or sideways? Then you can understand any well-explained method of investment research and factor it into your own decisions.
We thought we would take the opportunity here to lay out the basis of our own work. We have two not-mutually-exclusive goals in mind here.
First, we think anyone sensible is capable of being a successful public stock investor if they just (1) start believing they can do so and (2) arm themselves with the necessary methods and tools. And we’re always happy to share our work in furtherance of that.
Second, naturally enough, we’d like you to subscribe to one or another of our subscription services. They’re low cost, very well reviewed, and we know that as a basket the ideas in them work out well, because we eat our own cooking and thus far we have dined well. Guru-ism is notable only by its absence in our services; debate is busy and encouraged and the outcomes improved all the time as a result of our members bringing different ideas and perspectives. Better yet, you won’t find any bravado, braggadocio, SHOUTING, profanity, personal politics, or reluctance to ask the apparently dumb question. Think this is marketing-speak? Check our reviews.
Anyway - without further ado - here’s how we go about our day job of selecting great growth stocks.
Start With The Company
Companies are not stocks, and stocks are not companies. Companies develop products and services and sell them, employ people, and publish financials. Stocks are just numbers on a screen which to quote a recent favorite Tweet “mean that if you do it right you can turn them into useful stuff like houses and cars”. What makes a great growth business? Easy. Big and growing market, ideally a market which is deflating the way things have been done for a long time, differentiated intellectual property, pricing power, great manageme…. waitaminute, how are you supposed to be able to spot all that at a distance? Well - two ways actually. If you’ve spent your entire professional career on investment matters, as we have, then it becomes second nature. But if you haven’t, don’t worry, there’s a shortcut. It’s called the financials. If you have a company that is growing consistently every quarter, at high gross margins (meaning it probably has a lot of intellectual property), generating either positive account profits and cashflow or looking like they might do soon? Great. If the balance sheet has a lot of cash on it? Good. If they aren’t issuing piles of new stock every three minutes? Even better. When we cover a stock, as you’ll have seen from our work, we publish company financials in great detail. Here’s CrowdStrike ($CRWD) for instance.