Growth Stocks

How to Invest in the Best Growth Stocks:
5 Rules for Successful Growth Investing

Recognizing the value of investment education, I’m going back to the  basics, bringing you five rules for successful growth investing and finding the best growth stocks, complete with the all-important reasons why. You can also download a report by Cabot's Vice President of Investments, Mike Cintolo, with the names of the 10 best growth stocks to buy now (see below).

1.  Use market timing to guide your growth investing. In bull markets, we say, “A rising tide floats all boats.” In bear markets, we say, “It’s hard to swim against the outgoing tide,” ... as so many investors have learned. So learn to recognize the major trend of the market, and learn to respect the power of that trend.

10 Best Growth Stocks to Buy Now

Download your free special report, "10 Best Growth Stocks to Buy Now." We give you the names of the top performers and the reasons why they made our list. Get it today!

10 Best Growth Stocks to Buy Now


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When you get your free report, you will also get a BONUS, a no-cost subscription to the Cabot Wealth Advisory, your source for timely market insights and top stock picks from our experts.

Why Invest in Growth Stocks: 
Growth stocks are shares in a company whose earnings are growing faster than the overall market. They are expected to increase the value of your portfolio. They do not typically pay dividends; rather, the company invests excess cash back into the business to increase (‘grow’) the value of the company.

If you want to grow your wealth (as opposed to taking income from your investments), and have a few minutes each day to manage your portfolio, growth stocks are for you.

Good growth stocks will have these characteristics: 
  • Revenues and earnings are growing at a rate of at least 10%, compared to the same period a year ago.
  • There is great potential for future growth.
  • Profit margins and cash flow are healthy.
  • Not yet a ‘darling’ of the investment community, a growth stock will have a growing institutional following, which provides some stability and predictability to the stock’s price action.
  • The stock price is going up. 
Some of the growth stocks that Cabot subscribers have profited from include Home Depot, Cisco Systems, Apple,, eBay, Crocs, Monster Beverage, Las Vegas Sands, First Solar, Chipotle Mexican Grill and many more familiar names.

Cabot Market Letter, Cabot’s flagship newsletter, has fine-tuned its growth investing strategy since 1970. Cabot China & Emerging Markets Report applies this strategy to growth stocks in the fastest-growing markets on earth.
2.  Do your very best to ignore the economic news. The fact is, the stock market is always looking six to nine months ahead, so today’s news means nothing. Sure, the ongoing drama in Europe makes for great cocktail chatter, but it won’t help you make money. In fact, if you’re always focused on investing according to the hottest news,  you’ll find you’re always one step behind the professionals. You’re at a disadvantage. To succeed as an investor, you’ve got to find an area  where you have an advantage, and that’s on the road less traveled, namely younger, less well-known companies and stocks.

3.  Invest in fast-growing companies. Fast growth can overcome a huge number of smaller deficiencies, like inexperienced management, competition, weak patent positions, and more. And fast growth eventually attracts the attention of institutional investors, who are very useful in both providing downside support and in pushing prices higher as they buy their way in. The best growth stocks are in small companies growing at triple-digit rates—100% or better—through organic growth, not acquisition.

4. Average up in your winners. As the song says, “Accentuate the positive.” So when you've invested in a small, fast-growing company, and the market gives you a profit, don’t take the profit. Wait for a normal pullback, and then buy some more of that top growth stock!

5.  Cut losses short. As the song says, “Eliminate the negative.” If a stock you bought has declined, it has not done what you hired it to do. Thus, you should consider letting it go. Analyze the chart carefully, and tolerate no losses exceeding your own personal pre-set limits. Our absolute maximum loss limit is 20% in bull markets and 15% in bear markets, but we do our best to cut them even shorter. The very worst thing you can do is let a loss get bigger and bigger.

Perhaps the biggest rule of all, which has existed for centuries, is about diversification. “Never put all your eggs in one basket.”  This applies even to the best growth stocks. Of course, everybody knows this, so I don't even include it my five growth investing  rules. But sometimes ... people forget.

•  Learn more about Growth Stock Investing

Articles on the best time to buy, winning growth stock strategies, stocks for retirement, basic rules, mistakes to avoid and more...

  Read about Growth Stocks in the Cabot Wealth Advisory Archives:
Tesla Motors—Is It Too Late to Buy?
Tesla Motors (TSLA) has been one of the hottest stocks in the market, zooming to a gain of 206% over the past 10 weeks. Year-to-date, it’s up even more. So is it too late to buy?
4 Stock-Picking Tips You Can Use to Find Big Winners
It’s easy to simply recommend specific stocks. But doing that is like giving you a fish, when we really want to teach you to fish. Today I will give you stock-picking tips and focus on some “tricks” I use to find big stocks.
Growth vs Value Investing
Every investment portfolio ought to have some of both value and growth in it. Value is a great foundation for a diversified portfolio. But if you stick strictly to value, you’re leaving lots of growth gains on the table.
Tesla Motors Long Term Future
I can’t resist noting that today Tesla jumped 21% at the market open, thanks to news that sales had exceeded expectations and that the company turned a profit in the first quarter of this year.
The Luck Factor in Growth Investing
I think we sometimes don’t give enough credit to one factor that has an enormous influence on growth stock investing results, especially in the short-term. Luck.
3 Strong Momentum Stocks for 2013
The market is doing well, and sentiment is lousy: that's the perfect environment for market gains. To take advantage, you'll want to be in the market's strongest momentum stocks.
How to Know When a Bull Market Starts
When an athlete winds up on the cover of Sports Illustrated, lots of fans assume that a loss is on the way. There is an equivalent phenomenon in investing, and that’s when The Bull gets featured on the cover of Time Magazine.
Has Apple Stock Peaked?
There’s a chance that investor perception of the company is so high that all the big investors already own as much Apple as they can carry. It means there’s more potential selling pressure on Apple’s stock than buying pressure.

Timothy Lutts can be found on Google Plus.