Thread: Growth Investing Strategies
When evaluating new positions, it becomes a very methodical and repetitious process over time. As I continue on my investment journey, I find myself understanding more and more about what good looks like. Especially, after you’ve read many
When evaluating new positions, it becomes a very methodical and repetitious process over time. As I continue on my investment journey, I find myself understanding more and more about what good looks like. Especially, after you’ve read many
investor presentations and 10Q’s. However, over time it becomes more simple and if I were to oversimplify the strategy as a whole it comes down to one thing, growth. There are three growth metrics an investor should evaluate first before any time is wasted any further, they are:
1.) Past YoY revenue growth. The reason why this is significant is that it clearly shows you from a birds eye view how effective management is on executing their growth and expansion strategy. Many speculative investments (today I find them in EV, and in 2018 found it in MJ)
do not demonstrate a clear execution on their business plan. They’re new, therefore, an investor is unable to hold the position long term. This also shows past adoption among consumers, which is obviously the most important aspect as an investor.
2.) CAGR, CAGR, CAGR, thank you @saxena_puru for showing me the important of this metric. It clicked when he posted, “CAGR is all that matters.” Let me explain why; this is your potential compounded return as an investor. The CAGR allows you to quickly analyze the
the TAM (total addressable market) and what the company thinks it will be able to execute on in terms of penetration of that market. The more innovative and disruptive the company is, the higher the CAGR. Think $PLTR, which has a 30%+ CAGR for years to come. $FVRR does too.
3.) One of the most fundamentally over looked metrics, but arguably the most important for LONG TERM gains with widespread adoption is EARNINGS growth. This allows you to assess the path to profitability. Sure, in 2020 the market has allowed for above average returns among
companies that are not yet profitable but in a down or sideways market this is all that matters as investors strive to find safe havens for their money. The reason why earnings growth is important, and why a clear path to profitability is important is that indicates staying
power. This is the ultimate goal for any company, and it should be, for every investor.
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