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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:
- 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.
- Strong
cashflow per share, well in excess of earnings per share.
- 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:
-
A low prospective price-earnings ratio in relation to
the market average.
-
Strong cashflow per share, well in excess of earnings
per share.
- 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 |
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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 |
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