Growth stocks in your AA

[mistymoney]

so - noted a fe comments about growth stocks in some threads.

How many of you have a specific percent dedicated to growth stocks? What percent is that and what other stock types do you identify in your AA?
Or do you just accept growth as a part of sp500 or total stock index funds with only an AA allocation to stocks in general?

For those who target growth - what vehicles do you use? Or do you pick stocks for that allocation?

For those who do/have targeted growth specifically, what notes on your experiences or thoughts would you share?

[MustacheAndaHalf]

To the inevitable posters who bring up passive index funds, I do have money passively indexed.  But I also allocate some of my money to beat the markets, and if I fail at that I can afford the loss.  My expected withdrawal rate is under 1%.

With that context, I have a paid subscription to a couple "Motley Fool" stock picking services.  I'm mostly in agreement with their choices, which tend to be growth stocks (like Amazon 20 years ago!).  But right now growth stocks are doing badly, and those stock picks along with them.  For 2022 and maybe 2023 I have to stomach poor returns... but over the next 5 or 10 years I expect them to pull ahead of the stock market.

For someone wanting to invest in growth stocks right now, look at not only the losses, but the up and down moves with these stocks.  I would not recommend it for most people, since most people will panic when a new holding falls too far.

[ChpBstrd]

Growth stocks are getting hit because the bulk of their future earnings occur in the distant future, as opposed to the near future for value stocks. When rates rise, the net present value math takes off more value from those distant earnings than from more recent earnings.

Also, geopolitical events are raising questions about growth stocks' potential in China. A new cold war would shut out Tesla, Amazon, and Apple from their Chinese factories and information markets, a possibility on a much bigger scale than what just happened in the much smaller market of Russia. If that outcome emerges, the growth narrative supporting those far-future earnings expectations will vanish.

I have a couple of individual growth stocks too, but I'm positioning for firms with lots of domestic growth potential like Roblox and Salesforce or niche firms that will benefit from the scenarios that harm most growth companies like LYSDY. So my growth allocation, outside of index funds, is limited to finding special opportunities.

[reeshau]

"Growth and value investing are joined at the hip."  -- Warren Buffett

Most talk about "growth" in this context as currently money-losing enterprises eventually making money.  That might be earnings-starting companies.  Companies growing earnings in a steady way, in good times and bad, are worth their weight in gold.  Any time they are on sale, the decision to buy is easy.

When I am looking for growth, I follow the methods of BetterInvesting, which could be grouped as a GARP philosophy, but first and foremost emphasizes the quality of the earnings growth, meaning easily predictable.  (More easily than is typical)

Apple, while quite large at this point, is a classic example.  Look at its earnings, and you see neither the great recession nor the pandemic.  Share prices may move with the market, but as earnings are driven by their own steady plan, the market value will follow.

“In the short run, the market is a voting machine but in the long run, it is a weighing machine.” -- Benjamin Graham

[vand]

Why are people so enamoured with Growth stocks? Does the term suggest that the stock price is more likely to grow? If that's what you believe then you need to re-evaluate what you know about investing.

Finding growth is easy. Finding growth that isn't being overvalued by the market is far, far harder.