Growth Shares

The Investing for Growth (IfG) method is based on the premise that growth shares, which fulfil certain exacting criteria, are very likely to outperform the market. Three important criteria are:

1. A low price-earnings growth factor (PEG). This means a low prospective price-earnings ratio (PER) in relation to the company's earnings growth rate.
2. Strong cashflow per share, well in excess of earnings per share.
3. Strong share price momentum as measured by high relative strength against the market.

This presupposes, of course, that the company under review has a robust business model and an identifiable competitive advantage. There are other important criteria to be considered. A strong balance sheet and cash position is essential and directors' cluster buying is a major plus.

There is a scarcity of shares that meet these demanding criteria, so it is important to identify such opportunities and weight your portfolio accordingly. IfG works on the principle that it is best to run profits and cut losses. In the long term, adopting this policy can have a very beneficial effect on your share portfolio.

Blue Chip Shares

In a recent survey, subscribers to IfG made it clear that they wanted the focus of the newsletter to be on smaller and medium sized growth companies, an area in which IfG has established its reputation for picking winners in the past.

Subscribers also benefit from recommendations on value shares with high levels of asset backing and high yielding shares for income. This mirrors the balanced portfolios that most investors seek, which is capital growth and income.

The newsletter has also used Dreman's contrarian investment approach, particularly when the market is difficult. This assumes that much of the bad news is fully accounted for in the price of an out-of-favour share so when it surprises the market its price can rise substantially.

The key characteristics to look for in these out-of-favour stalwarts are:

1. A low prospective price-earnings ratio in relation to the market average.
2. Strong cashflow per share, well in excess of earnings per share.
3. A strong financial position.

When IfG searches for these sorts of blue-chip stocks it also insists on a well above-average dividend yield and looks for rising earnings per share, even if the increase is only forecast to be modest.

Special Feature Article
	Five years ago, Jim Slater published an article on when to sell. In view of the current market turbulence and uncertainty, we thought it would be a good idea to invite him to edit and update his article. We consider this an all time classic and we are sure it will be of great interest to all our subscribers. Click here to view the article