A Wealth of Common Sense: Talk Your Book: Quality Growth Investing
Investing comes in all types and flavors. However, most styles tend to get grouped as either value or growth. Right now, the market loves growth, especially given the prospective returns of AI stocks.
However, value stocks can also lead to great returns for patient investors over time. That said, there are ways to blend the two ideas together. Ideally, that can mean getting the best of both, high growth at a reasonable value.
One way is to look at a company that’s growing in terms of the quality of its growth. That gets into a company’s earnings, and how those earnings are made. Rising revenues and cash flows matter more than the one-time sale of a division.
A company that makes inconsistent moves or spends tremendous sums on new endeavors may be a poor one. Meta Platforms (META) which is a massive cash generator with its social media sites, fits the bill. Meta’s push into the metaverse moved away from growing quality earnings.
A company that focuses on quality can also see growth under any market conditions. Factors such as inflation or rising interest rates should have little impact on the business itself. A company that needs low interest rates to succeed likely has not done so.