3 Essential Rules For Every Aggressive Growth Investor
Every intelligent investor’s portfolio must devote assets to aggressive growth.
No exceptions.
Because finding a winning aggressive growth stock isn’t easy, I want to share with you how I do it…
I look for companies with products, technologies or other innovations that materially change the baseline assumptions for doing business in an industry.
These are the companies seeking to hit one out of the park by finding The Next Big Thing.
You see, I have a knack for this. I don’t mean to brag, but in my years with StreetAuthority, I’ve picked more triple-digit gainers than just about any other analyst.
A few years ago, for example, I recommended AuthenTec, a company beginning to dominate the market for biometric readers – fingerprint scanners on personal electronic devices.
Not too long afterward, Apple agreed to buy the company.
Readers who followed my advice saw a total gain of 228%.
Another example: CalAmp (Nasdaq: CAMP), a maker of wireless communications hardware, rose 290% after I recommended it.
That’s just the tip of the iceberg.
And I’ve done it by following three simple rules that any investor can follow.
Rule No. 1: Be realistic to the point of hyper-rationality
I lost track years ago of how many clinical trials I’ve read about various drugs.
But do you know something? At the end of every report, I wanted to buy every one of the stocks behind those drugs. The studies are detailed and educational. They set up the problem and then offer a unique solution. The science, the explanation, the data and the financials are always very appealing.
But these early-stage drug-development companies are very risky. Heck, they are damn risky. No matter how good the initial trials look, there is no guarantee of approval, and a negative action by the Food and Drug Administration can cut a small drug company’s stock price in half quicker than you can say Jack Robinson.
The other side of that coin, of course, is that the FDA (or one of its international counterparts) could rule in the drug’s favor, in which case the little company’s stock price chart resembles a space shuttle launch.
Now, the world’s leading drug companies spend tens of BILLIONS a year looking for new drugs. But the FDA may only approve, say, 50 new drugs in a given year. But according to the Pharmaceutical Research and Manufacturers of America, only 1 in 10,000 of the compounds studied by drug companies becomes a product for sale on the pharmacy shelf.
How does an investor mitigate this risk? Research, research and more research.
I began my career as a journalist, and I learned there was no substitute for good old-fashioned shoe-leather reporting.
Aggressive growth investors must cut through all the hype. They must prosecute every claim. They must use facts and hard data to quantify a stock’s likelihood to head skyward.