How to Spot Healthy Growth as Stocks Rip Higher

It’s all in the fundamentals… Published By Money & Markets, LLC. August 20, 2024 Published By Money & Markets, LLC. August 20, 2024 [Turn Your Images On] Editor’s Note: Stocks are on a tear this year, and growth is in the spotlight once again. So we thought it was prudent to highlight this past essay from Adam. If you want to know what good growth looks like, and how his proprietary Green Zone Power Ratings system finds it, read on… [Turn Your Images On] From The Desk of [Adam O'Dell]( Editor, [Money & Markets Daily]( How to Spot Healthy Growth as Stocks Rip Higher Money & Markets Daily, I’ve written before about how I use the Value factor in my proprietary Green Zone Power Ratings system to identify cheap stocks without getting sucked into a dreaded [“value trap.”]( And one of the best ways to do that is to also focus on a company’s growth. I use the Growth and Quality factors within my system to help me weed out stocks that look like good values at first glance. So today, let’s take a deeper look at my Growth factor’s role in the equation. You might be wondering: What is growth? When I speak of growth, I’m not referring to a stock’s price. I’ve created three specific factors that analyze that — Momentum, Size and Volatility. My Growth factor is focused on a company’s fundamentals. It measures the rate of expansion for revenues and profits. We’re looking at the prospects of the underlying business. And it tells us a lot about where the company — and its stock — are headed. Why Growth? Let’s start with the basics. When you buy a stock, what are you purchasing? Let’s be serious: You and I aren’t going to sit on the board of directors, and we have no control over the company’s assets. We’re passive investors. When we buy shares, we’re buying a fraction of the company’s future earnings. (And there's potential for a stream of dividends, too!) If you want a rising stock price over time, you need a growing business to support it. If you’re looking for a healthy dividend check to hit your account each quarter, you need a growing business to support it. If you want to stay ahead of inflation … you get the idea. --------------------------------------------------------------- [Turn Your Images On]( [Apple's Secret Software Update]( Apple has been quietly working on a revolutionary new technology. This technology — codename “MM1” could send TRILLIONS of fresh dollars rushing into the economy. And Chief Investment Strategist Adam O’Dell has identified [one tiny company]( that could be at the center of Apple's new world-shifting device. [Click here right now to get the full details.]( --------------------------------------------------------------- How I Measure Growth In Green Zone Fortunes, we look for stocks that we can hold on to for a while. That means I’m not going to base my decision to add a new monthly recommendation on a single quarter or even a single years’ worth of sales or earnings growth. There can be a lot of noise in short-term data. Growth can vary from quarter to quarter, or even year to year, based on where we are in the economic cycle. We’re looking for consistency with a long history of growth. I can’t give you the secret sauce, per se, but I can give you an idea of what I’m talking about. My Growth factor is a composite score made up of 18 subfactors. I look at growth in revenues, net income and earnings per share. And I use a variety of time frames, ranging from a single quarter to 10 years. It might seem redundant to track revenues, net income and earnings per share, but each has its place. It starts with top-line revenue growth. A company cannot sustain profits unless it grows its sales first. Sure, cutting costs can boost earnings, even with flat or declining revenues — but only for a while. For sustainable earnings growth, you need a growing revenue stream supporting it. All the same, revenue growth in the absence of earnings growth is nothing to get excited about. In fact, if revenues grow but net income doesn’t, that can be a sign of a company facing cutthroat competition and declining profitability. We want net income to grow at least in tandem with revenues over time. What about earnings per share (EPS) … and how is that different from net income? We calculate EPS by dividing net income by the number of shares. If the company’s share count is stable, earnings per share should rise in line with net income. But share counts are not always stable. Companies issue new shares via secondary offerings or executive stock options, and they reduce their share counts with buybacks. If I see EPS growing at a much slower pace than net income, that could be a sign of excessive share dilution and would make me think twice about buying the stock. Growth Isn’t the Only Key I’m a growth investor, and I love the challenge of looking for the next big mega trend. But I also know that investors can and often do overpay for growth. And this is where we come full circle back to value. By considering my Value factor alongside my Growth factor within Green Zone Power Ratings, I can target growth at a reasonable price. If you like the way I approach investing, give my premium newsletter [Green Zone Fortunes]( read. In each issue, I use the market-crushing combination of Value and Growth (along with my Momentum, Size, Volatility and Quality factors), mega trends with true staying power and an X-factor that other investors are overlooking to recommend stocks that can outperform — no matter what the market is doing. [Click here to find out more]( join us before I send out my next recommendation later this week. To good profits, [Adam O'Dell]( Editor, [Money & Markets Daily]( --------------------------------------------------------------- Check Out More From Money & Markets Daily: - [THE 5: WHAT TO WATCH AFTER NVDA'S 17% GAINS]( - [BILLIONAIRE OFFERS 3 RULES FOR 10,000% RETURNS]( - [BEWARE THE SUGAR RUSH INVESTORS HAVE FOR THIS STOCK]( --------------------------------------------------------------- [Turn Your Images On]( Privacy Policy The Money & Markets, P.O. Box 8378, Delray Beach, FL 33482. To ensure that you receive future issues of Money & Markets, please add info@mb.moneyandmarkets.com to your address book or [whitelist]( within your spam settings. For customer service questions or issues, please contact us for assistance. The mailbox associated with this email address is not monitored, so please do not reply. 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To ensure that you receive future issues of Money & Markets, please add info@mb.moneyandmarkets.com to your address book or [whitelist]( within your spam settings. For customer service questions or issues, please contact us for assistance. The mailbox associated with this email address is not monitored, so please do not reply. Your feedback is very important to us so if you would like to contact us with a question or comment, please click here: [( Legal Notice: This work is based on what we've learned as financial journalists. It may contain errors and you should not base investment decisions solely on what you read here. It's your money and your responsibility. Nothing herein should be considered personalized investment advice. Although our employees may answer general customer service questions, they are not licensed to address your particular investment situation. Our track record is based on hypothetical results and may not reflect the same results as actual trades. Likewise, past performance is no guarantee of future returns. Certain investments carry large potential rewards but also large potential risk. Don't trade in these markets with money you can't afford to lose. Money & Markets permits editors of a publication to recommend a security to subscribers that they own themselves. However, in no circumstance may an editor sell a security before our subscribers have a fair opportunity to exit. Any exit after a buy recommendation is made and prior to issuing a sell notification is forbidden. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. (c) 2024 Money & Markets, LLC. All Rights Reserved. Protected by copyright laws of the United States and treaties. This Newsletter may only be used pursuant to the subscription agreement. Any reproduction, copying, or redistribution, (electronic or otherwise) in whole or in part, is strictly prohibited without the express written permission of Money & Markets. P.O. Box 8378, Delray Beach, FL 33482. (TEL: 800-684-8471) Remove your email from this list: [Click here to Unsubscribe](