How To Invest In Growth Stocks For Beginners In 2022 [FREE COURSE]

We're going to be doing a course here Talking about growth investing 101 some Of the basics i believe we have 15 Different videos outlined and in this Video being the very first one all i Want to talk about is what are growth Stocks what are growth investments these Are going to be some of the basic Characteristics of growth investments And First of all number one the reason why We call these growth stocks is because These are growing companies so i know We've talked about this in the past but Companies can basically be in two Different types of operations or modes You could say they could be in income Mode or they may be in growth mode and If a company is in income mode they Simply are paying out dividends they Don't have any stellar growth potential And as a result they're paying out Dividends to shareholders to keep them Around to reward investors and if a Company is in growth mode they're not Focused on paying out dividends to Shareholders they're focused on growing That company growing earnings and Growing revenue but once a company Becomes a certain size they're a very Large company they're a well-established Company the blue chip company if you Will there's not a lot of growth Potential for them and they're certainly

Not going to be growing as fast as a Newly formed company so when you're Looking at income investments and we're Going to cover more about this in part Two here so if this seems kind of brief We're going to cover more of this in the Second video but if you're looking at Income investments you have to Understand that these are larger Companies that have already had a lot of That growth take place but we're going To be focusing on the companies that are Rapidly growing right now In this outline here or in this section When you're looking at growth Investments but the first characteristic Of a growth investment is that the Earnings of this company are expected to Grow at a faster rate than the overall Market average so if company earnings Overall were growing at a rate of five Percent per year a growth investment Would have earnings that were growing at A faster rate maybe their earnings are Growing at 10 per year or 15 or 20 Percent per year so that is what a Growth investment is Now you might be comparing this to the Actual industry or sector average so if You were looking at a semiconductor Company you would look at the earnings Growth of this company over the next Five years the projected annual growth Rate and you would compare that to the

Projected annual growth rate of that Industry or maybe of the competitors so All you're looking to do if you're Looking to identify a growth stock one Of the first things you're going to look At is that growth rate of how fast this Company is expected to grow earnings Over the next five years or so and You're going to see if this company is Going to be growing faster than that Industry or sector average and also Faster than the peers now the second Thing you're going to notice about Growth investments is that it's Typically newly formed companies these Are not companies that have been around For hundreds of years now sometimes you Do see an older blue chip company Performing like a growth stock we're Seeing that happen with uh boeing as far As what happened in 2017 how that share Price went up almost 100 percent in 2017. we covered that over there in the Stock analysis section of this group if You guys missed that but sometimes you Will see a large well-established old Company performing like a growth stock Because they're turning over a new leaf Or the business has significantly Improved so but typically speaking these Are going to be newly formed companies That are going to be growth stocks we're Talking about companies like facebook Like amazon like uh some would even say

Apple is a growth stock they're more of A conservative growth stock now we're Going to be talking about both Conservative and aggressive growth Stocks in this course here because most People know that growth stocks are Higher risk and higher potential return Investments but there are lower risk Investments in the growth stock area Which would be the conservative growth Stocks or companies like apple for Example but you want to think about Growing companies that are in a growing Industry that are rapidly evolving that Is typically what we're characterizing Growth stocks as So what else do we know about them they Are typically operating in a new or Emerging industry and the example that i Want to use here is the marijuana Industry so there's no blue chip Companies right now that are growing Medical marijuana because this is a Brand new industry so all these Companies that are out there that are Growing marijuana for medical purposes In canada and they're publicly traded All of these are very small cap growth Stocks because they're brand new Companies Maybe in 50 or 60 years if this industry Continues to take off the way it does And some of these companies become these Well-established companies now they're

Not a growth stock anymore they're an Income stock but because the marijuana Industry is so new there are no big Players there because there hasn't been A chance for anyone to really take off And become the big player as far as the Blue chip company these are all newly Formed smaller companies so typically You're going to find that all the Companies that are operating in a new or Emerging industry are typically going to Be growth stocks Number four you're going to find that These stocks are going to have higher Volatility and if you're not familiar With what volatility is we do talk about This over in the course on stock tables But basically volatility is the tendency For this stock to have upward and Downward price movements the best way to Look at the volatility of an investment Is to look at the beta that compares the Volatility of this stock to the overall Market but you're going to find that Growth investments are typically going To be more volatile there's going to be More people buying and selling them and You're going to find there's more Explosive price moves with growth Investments just because these are not Well established companies with a track Record these are newly formed companies And most of them don't have a track Record and a lot of them also are not

Even profitable companies so they're Going to be inherently more volatile and This is something we don't have on the List here but we also know that growth Stocks are typically going to be smaller Cap companies not always the case Because we know amazon and facebook are Growth companies they're growth stocks But their market caps are through the Roof their mega cap companies but Typically speaking you're going to find That Growth stocks are going to be smaller Cap companies and as far as market Capitalization goes if you're not Familiar with that that's just the price Per share times the outstanding shares Or what the actual market is valuing This company at and typically if it's a Growing company in a new industry it's Going to be smaller and it's going to be A company that has less value or it's Valued at a lower price by the market Because it is a new company now another Thing you will find when looking at Growth stocks is that they typically are Higher p e ratio companies due to the Fact that a certain amount of that Future growth potential is priced into Today's number now if you want to learn More about how to value a company go Ahead and take fundamental stock Analysis 101 and we're going to talk About the p e ratio the forward p e the

P e g ratio all kinds of different Ratios to determine how much of that Future growth or anticipated growth is Priced into today's number so we're not Going to go into that in any more detail Because that's already been covered in Fundamental stock analysis 101 but these Companies are typically going to have a Much higher p e ratio than an income Investment out there would number six You're going to find often times these Companies are not even turning a profit This is largely due to the fact that They're oftentimes operating in a brand New or emerging industry and they're Laying out a lot of capital to grow the Company as fast as possible so if we use Some of these marijuana stocks or Marijuana companies in canada a lot of These companies are expanding their Operations they're upgrading and Building new facilities and they're Throwing as much cash into the business As possible to grow as fast as possible And as a result many of those companies Are not profitable and this is something That is typical of a growth investment However it is not always the case and i Will say this if you are a beginner And you're looking to get some exposure To some growth investments but you're Not looking for any kind of crazy Volatility avoid any company that is not Turning a profit it is these

Unprofitable companies that are Typically going to be a lot more Volatile and then the final Characteristic i have of a growth stock Is that you should expect a 20 or more Drop at some point in time i'm not Saying it's going to happen tomorrow i'm Not going to say it's going to happen at All but just be prepared for it Emotionally because this happened to me With my investment in um advanced micro Devices it's one of the stocks i've been Holding for a very long time and at one Point in 2017 they reported earnings That disappointed investors and because At that point in time they were an Unprofitable company the stock just fell Flat the stock fell like 25 Over the course of one trading week and You just have to keep that in the back Of your mind that this is something that Can happen with a growth investment Because these are higher risk higher Potential reward investments and you Have to have the stomach for that if a 20 loss is something that scares you and You don't have the stomach for it then You should probably stay away from high Risk growth investments or aggressive Growth stocks especially those that are Companies that are unprofitable that's Just not going to be the right Investment for you and in this video We're going to be talking about growth

Investing versus income investing and What each of these actually looks like Using numbers as examples it's one thing To explain it with words and say okay so A growth investor is looking for asset Appreciation while an income investor is Looking for those regular dividends but It's easier to actually visualize it in My opinion and so what i'm going to show You in this video is what it looks like To be a growth investor what it looks Like to be just purely an income Investor and then what it looks like to Have a blended strategy of both of these And then what the actual goal is of all Of these things so whenever you're Investing you always want to make sure You have a goal as far as what you are Investing for and what each of these Stocks or investments is doing for your Portfolio is this a growth component of Your portfolio an income component is it A little bit of both and so you kind of Want to know before you buy something What is this actually doing for me So let's go ahead and start off by Looking at a growth investment and Showing what you're actually looking to Have happen when you're buying a growth Stock so when you're investing in a Growth stock it's a company that is Likely not profitable maybe it is Profitable if it's a a more conservative Growth stock a company that's been

Around for a long time or maybe it's a Company in a brand new industry and they Don't have a means of turning a profit Right now what are you actually looking For that company to do Well hopefully down the road that Company is going to become profitable They're going to turn a profit and What's going to happen is as that Company is reporting earnings and Growing earnings you're going to see That share price increase as a result or You're going to find that you have asset Appreciation so let's say you buy that Stock for a dollar a share And then a year later it's a dollar 10 Per share and then two years after that It's a dollar twenty per share so what You're seeing take place there is asset Appreciation where the actual value of Those shares is increasing over time so How do you make money when it comes to Investing in a growth stock if they're Not paying you dividends you make money By buying at a lower price and then Selling at a higher price so the way you Would make money in this situation would Be buying your shares a dollar per share And then maybe two years later selling For a dollar 20 and then you made 20 Cents per share on however many shares You had of that company that is how You're going to make money as a growth Investor now as an income investor what

You're looking for is just those regular Cash payments from that stock those Dividend payments you really don't care About the asset appreciation if you're Purely looking for income now most Investors out there are not purely Looking for income from their investment They want both they want to make sure The actual underlying asset or the stock Is appreciating in value as we saw here And they also want to get those regular Cash payments from that investment but If you're purely looking for income all You're looking for is those dividends so In year number one that stock is a Dollar per share in year number two that Stock is one dollar per share in year Number three that stock is a dollar per Share but each year you got five cents In dividends per share so all you care About as a pure income investor is that Five cents paid out to you per share per Year or that five percent dividend now I'm guessing that most people including Me are not interested in being a pure Income investor because i also want to Make sure the actual stock i'm investing In the actual share price is going to Increase over time so that's when you're Looking for a blended approach of both a Growth and an income investment so the Actual company has growth prospects to Grow earnings and At that point have a higher share price

As a result but they're also a Well-established large company that is Able to pay out a quarterly dividend so Maybe you buy shares for a dollar per Share and a year later the shares are a Dollar or three and then a year after That they're a dollar oh six but during That time as well they paid that five Cent dividend they paid that five cent Dividend so in the blended strategy You're able to be paid in two different Ways number one the asset appreciation Where that stock went from a dollar a Share to a dollar oh six over those two Years and then number two you also have Those regular dividends that that Company is paying and hopefully they're Raising those dividends as well now i Know we're talking about growth Investing in this course and i just Threw in their income investing and i'm Going to do a whole course on income Investing 101 i'm sure you guys are Going to be interested in that but if You're not for some reason just let me Know but seems like a logical step for Me to do that um Very soon here probably after i do this Course we'll do income investing 101 but Now you understand what the actual goal Is here when you're investing in a Growth company or a growth stock you're Looking to have that asset appreciate And maybe this is a company that is a

Blended investment where it's a little Bit of a growth investment a little bit Of an income investment because it's a Company that pays dividends but they do Have strong growth prospects and so You're looking to get paid in two Different ways but what is the actual Goal here with these strategies if You're looking to invest for growth what You're looking to do is build your Wealth so that is why a lot of young People are investing in growth stocks And we're going to cover that later on As to who should be investing in growth Stocks but when you're investing in Growth stocks or a growth investment You're looking to build wealth while Most people invest in income investments With the goal of both preserving their Wealth and outpacing inflation so first Of all you're looking to invest in a Company that is paying out those regular Cash payments and you also want to make Sure you're investing in a company That's not very volatile you don't want To see any explosive moves with that Share price because if you're older and You're investing for income and you're Just looking to preserve your wealth you Don't want to see that actual underlying Asset decrease a lot in value because at That point you're going to be needing That money in the short term and so That's why a lot of people actually

Nearing retirement age have very little Money involved in stocks because it's Very hard to find a a very stable Investment when it comes to stocks maybe You'll find a very low risk index fund Of some kind but if you are looking to Invest for income the goal there is to Preserve your wealth and to outpace Inflation and if you're going to do both If you're looking for a blended Investment you're looking to have both That asset appreciation to give you that Growth to build your wealth but you're Also looking to get the dividends in Order to you know beat inflation and Have that second option available to you As far as being paid and most people who Are investing with that blended approach Are probably going to be setting up a Drip or a dividend reinvestment plan and So all those quarterly dividend payments Are going to be reinvested back into That issuing stock just to allow you to Accumulate more shares that are Hopefully going to appreciate in value And pay you more dividends down the road And that is right there how you build a Serious amount of wealth for yourself One way right there is using compound Interest and allowing your money to grow Over a very long period of time and in This video we're going to be talking About the difference between Being an aggressive growth investor and

A conservative growth investor and this Goes hand in hand with investing in Aggressive growth stocks and Conservative growth stocks so i should Go without saying but i'll go ahead and Say anyway a aggressive growth investor Will be investing in aggressive growth Stocks and a conservative growth Investor will be investing in Conservative growth stocks and if you're Somewhere in the middle you might be Looking to invest in uh blended Companies that are somewhere in the Middle there they're not super Conservative but they're not super Aggressive either and so basically all i Want to do here is outline the Difference between these two and really How you can begin to determine whether Or not a company is a conservative Growth stock or an aggressive growth Stock so first of all the easiest way to Explain this is to start by defining Both conservative and aggressive so Conservative simply means cautious about Change you're not interested in a lot of Rapid change or sudden change while Aggressive means you are open to rapid Change So if you are a conservative investor You're not looking to have any kind of Crazy amount of change take place in a Short period of time but if you're an Aggressive investor you're open to

Massive amounts of change so think about A company like amazon that is an Aggressive growth stock we're going to Talk about that a little bit later on But that's a company that is changing All the time they're acquiring new Companies they're releasing that they're Getting involved in new industries Whether it's the healthcare industry or Video gaming or pharmaceutical whatever It is they're constantly releasing Announcements that they're getting Involved in new industries and they're Rapidly changing all the time where if You look at a more conservative growth Investment then i'm going to lump apple Into that they're not super conservative But they're definitely a more Conservative growth investment it's Pretty clear on where this company is Heading in the future and you're not Going to really hear about apple making Any kind of crazy sudden changes Overnight they're pretty consistent at This point in time and that's typically The difference between a conservative Growth investment and an aggressive Growth investment is the amount of Change taking place uh over a period of Time you're going to find with an Aggressive growth investment there's Massive amounts of change taking place All the time with a conservative Investment it's pretty consistent what

That company is doing as far as their Operations go so first of all let's Start with some of the characteristics Of the conservative growth investments First of all you're looking for slow and Steady growth over a long period of time So if you're a conservative growth Investor and you're looking for a Conservative growth stock you're looking For a five plus year of consistent Growth and operations and maybe even Longer if you're looking for A more stable and time tested investment You're looking for low volatility you're Not looking for any kind of crazy Volatility where that price is going up And down all the time you're probably Looking at a company that is profitable You're not going to find a lot of Unprofitable companies that fall under The category of being a conservative Growth stock And you're looking to buy a company at a Reasonable valuation so maybe you're Somebody who Is a growth investor and then you use The fundamental analysis to determine Whether or not that company is Overvalued undervalued or fairly valued And you're basically looking to buy a Company that's reasonably valued by the Market that doesn't have a lot of crazy Volatility but they're going to have Consistent growth over a long period of

Time that would be a conservative growth Investment and a few examples of this Are johnson and johnson procter and Gamble and cisco and a lot of these Companies pay dividends as well so They're actually kind of a blended Strategy of both growth and income that Is what a conservative growth investment Would be Now on the other hand an aggressive Growth investment is going to have high Growth potential there's going to be a Lot of change taking place with that Company and there's going to be a lot of Movement with that share price and as a Result there's going to be high Volatility now that high volatility Might sound exciting but it's definitely Not for everyone and so a lot of people Are not interested in investing in Aggressive growth stocks now as far as The valuation goes When you're looking at aggressive growth Stocks the actual valuation of these Shares is of little to no importance of These investors because all they care About is the future prospects for this Company they care about the future and What this company will be doing a few Years down the road so they say i know This is a sky high p e ratio or the Forward p e is astronomical for example Looking at a company like amazon but They're just so dominant that i'm

Willing to pay that price because i Strongly believe in this company's Future so they say that i know the p e Ratio is very high right now and the Forward p e is very high and that's the Case with a company like amazon but they Believe that company will be doing so Well in the years going forward that They don't care about the actual Valuation of those shares and they're Willing to pay that price so a few Examples of aggressive growth stocks Would be amazon tesla and nvidia these Are companies that are rapidly changing They have huge growth potential but they Are very expensive stocks if you look at The valuation but do remember that Aggressive growth investors really don't Care too much about the evaluation of Those shares now do keep in mind like i Said you can find stocks in the middle You can find stocks that are more Conservative and you can find stocks That are more aggressive and maybe Stocks like johnson and johnson and Procter and gamble are putting you to Sleep well there's probably something in The middle here between johnson and Johnson and a stock like tesla where you Can find a company that is a little bit More aggressive but they're not super Aggressive to the point where that Valuation is just uh nonsensical and a Lot of the times that happens with these

Aggressive growth investments and in This video we're going to be talking About what the actual goal here when it Comes to investing in growth companies Is or what you're looking to have happen In order to have that asset appreciate So as we know now a growth investor is Looking to buy a stock at a certain Price and then sell it at a higher price Down the road but what is actually going To happen or take place that is going to Cause that actual share price to Appreciate well that's what we're going To outline in this video and there's Very simple steps here five simple steps Have to take place in order for that Asset to appreciate so first of all We're assuming we're investing in a Company that is in a growing industry or Sector because we've already said a Growth stock has earnings that are Expected to grow at a faster rate than The overall market so we know that the Sector or industry must be in favor in Order for that company to be Experiencing higher than average growth Compared to the overall market so number One the industry growth will result in More sales for that company so they're Selling more of the goods and services They provide so number two we're looking To see that the sales growth is Resulting in revenue growth and then Eventually resulting in more gross

Profit for this company and if the cost Of revenue is out of control then this May not be the case you might see a Company with more sales and more revenue But because cost of revenue is growing Even faster their actual gross profit is Flat or not seeing as much growth so That's when you want to be looking at The fundamentals in determining whether Or not the actual increase in revenue is Resulting in more gross profit for that Company now number three we are hoping That revenue growth is going to be Resulting in more earnings growth and Again this isn't always the case so are We actually seeing growth in the bottom Line as well as the top line or is this All top line growth for this company or Are they actually having growth on the Earnings per share this company is Delivering and if that's the case we're Hoping that higher earnings per share Will attract new investors and make this A more appealing investment and as a Result you're going to have investors Stepping up to the plate buying shares Increasing the demand for that stock and Driving up that share price so number Five the fifth step if all of these Things are working together and Everything is going well for this Company then the share price will Appreciate but why does this actually Happen i'm gonna give you a very simple

Example here looking at the p e ratio of A company So let's say the company is a hundred Dollars per share and the annual Earnings is two dollars per share That means their price to earnings ratio Is a 50 and let's say for this industry That is a very normal p e ratio let's Say it's the semiconductor industry and A p e of 50 is actually normal for this Industry now let's say that company is Doing very well and their earnings have Now doubled so now their earnings per Share over the last year are four Dollars per share but let's say it's Still valued at just a hundred dollars Per share well now that company has a p E ratio of 25. so if you're an investor And you're looking at the semiconductor Industry and you're going through Potential investments and looking at the P e ratio and you see a 51 a 52 a 48 a 47 and then a 25 you're going to go wait A second that is significantly Undervalued i'm going to buy shares of That company now i am not saying you are Going to have the opportunity to do that Because the market is very efficient and You're not going to find the pe of 25 Out of nowhere so you're not going to be Able to unearth opportunities like that In most cases where you're going to have A p e of 25 when the industry averages a 50 but you might find a slightly lower p

E due to the fact that the earnings are Higher and it is actually deflating that Price to earnings ratio as a result of Having higher earnings so we know that That stock should now be priced at the Industry average pe of 50 so in order For that to happen the share price will Have to increase so in order to have a Pe of 50 on four dollars of earnings per Share you need to have a stock that's Worth 200 per share in order to have That pe of 50. so if the company Earnings per share doubled and Everything else was the same then you Would need to have that share price Double in order to have that same price To earnings ratio as you did before and In a nutshell that is the goal here and That is what happens when you invest in A growth stock and you see asset Appreciation taking place and in this Video we're going to be answering a very Simple question which is who are they For who should be investing in growth Stocks or growth investments and Primarily it is three types of people And we're going to outline those right Here so hopefully this will give you a Good idea of whether or not you should Be investing in any growth stocks or any Growth funds index funds something like That But first of all it's for people that Have enough time on their hands in order

To let stocks trend upwards so Particularly we're talking about young People so people like myself if you're Young if you're in your 20s or maybe You're even a teenager still and you're Starting early then you should be Investing in something with some growth Because you have enough time on your Hands to allow that stock or that fund To trend upward and you can afford to be A little bit more aggressive with your Portfolio than somebody who is nearing The age of retirement so a young person Is going to have a much more aggressive Portfolio than an older person does and So if you are a young person and you Have a lot of time on your hands then You should consider investing in some Growth stocks or possibly a growth fund If you don't want to be involved in Individual stock ownership now number Two the second type of person who should Be involved in growth stocks is somebody Who has enough money they have enough Money to take on higher risk because if They're wrong about an investment then It's not going to be detrimental to them So you're definitely not going to be Turning around and investing your life Savings into growth stocks because these Are higher risk investments but if You're somebody who has a lot of money You're already well diversified and you Want to take on some aggressive growth

Investments just to see how it pans out Then that would be a good fit for you Because you have other investments you Have other pools of money to where if You lost this one or you took a Significant loss on that it wouldn't be Detrimental now if you were somebody who Didn't have a lot of money and you were Older then you probably shouldn't be Investing in growth stocks because Number one you don't have time to let Those stocks trend upward if you make a Bad decision and number two you don't Have a lot of money to offset a Potential loss that could occur with a Growth investment like we said these are Higher risk and higher potential return Investments and as a result if you are An older person it really doesn't make Sense to take on high risk at this point In your life and then third of all this Is people who have enough experience Enough experience to not get emotional Or emotionally involved with their Investments so if you know you're the Type of person who gets emotional when It comes to Making money or losing money then you Should probably stay away from growth Stocks until you have some more Experience with the market start out With blue chip stocks start out with Dividend stocks These are much lower volatility

Investments there's going to be a lot Less risk less potential return but also Less risk there and you need to do that In order to get some experience with the Market and really develop a gut for the Market because if you haven't done that Yet and like we said if you see a 20 Drop in a growth investment you're Involved with are you gonna get Emotional about that if all of a sudden You're down 20 on an investment are you Going to have the desire to sell and cut Your losses or what will your decision Be at that point in time and in this Video we're going to be covering three Telltale signs that you are in fact Looking at a growth stock now later on In this course i'm going to be showing You guys one of my favorite tools to Identify a breakout industry or sector Because one of the very first things you Want to look for is to make sure that This company is in an industry or sector That is growing faster than the market Average and i'm going to be showing you Guys my favorite tool to use in order to Find the breakout industries and sectors Out there but when you're looking at an Actual stock how can you tell whether or Not this is a growth stock these are Three telltale signs in my opinion and Number one is that the projected Five-year annual growth rate exceeds the Past five years and this is very simple

Is the company going to grow faster in The next five years than it did in the Past five years now do keep in mind the Projected annual growth rate is set by Analysts it's analysts expectations and At the end of the day It's their best guess but really it's The only number you can go off of Because nobody knows what's going to Happen with that company in the future But hopefully the analysts have a pretty Good idea when you take the average Figures across all of them as far as What their expectations are for this Company now as far as finding this Information i like to use yahoo finance And if you guys want some more Information on navigating that page Check out my free course on stock tables 101 that's also a part of this group Where i show you all the information Available on yahoo finance that is the Tool that i like to use for this type of Analysis but if you go to the yahoo Finance analysts page it will give you The anticipated five-year growth rate as Well as the historical five-year growth Rate and for example sake here we're Going to use qualcomm So qualcomm over the past five years had A growth rate or an annual growth rate Of negative 3.24 percent but the Anticipated growth rate over the next Five years is fifteen percent that's a

Very good growth rate and what we like About this is first of all it's a Double-digit annual growth rate which is Something that you should look for in a Growth investment as as far as an Aggressive one if it's a conservative Growth investment then you might not Want a double-digit annual growth rate But what you want to see here is a Double-digit annual growth rate for an Aggressive growth investment as well as The fact that the anticipated five-year Growth rate is a lot higher than the Past five years it's going to be growing Faster in the next five years than it Did in the previous five years the Second thing we like to look for is that Earnings per share are growing and also Beating analyst expectations so again i Use the nasdaq page they have a really Good page layout as far as the earnings Surprise go it tells you whether or not That company is beating expectations in Line or below expectations but there's a Lot of different tools out there that You can use but i like the one that Nasdaq offers it has the earnings Surprise but so let's use nvidia for Example These are the annual figures but for Fiscal year 2016 they did a dollar 08 in Earnings per share for fiscal year 2017 They did And 2.57 cents earnings per share and

For fiscal year 2018 they did four Dollars and 82 cents earnings per share Now i didn't go ahead and calculate Those percentages but it's clearly more Than a double-digit growth per year in Earnings per share and that makes this a Very aggressive growth stock and on top Of that over the last four quarters Nvidia has beat analyst expectations in All four of those quarters so they are Growing earnings per share at a very Rapid rate and they are beating analyst Expectations another sign that this here Is a growth stock and then third and Finally we look for double-digit revenue Growth year over year and uh for this We're going to use planet fitness as an Example so in fiscal year 2015 they did 331 billion dollars in revenue for Fiscal year 2016 they did 378 billion And for fiscal year 2017 they did 430 Billion so that gives them an annual Growth rate of 14 per year making this a Growth stock so that right there are the Three signs in my mind that you're Looking at a growth stock this is what I'm looking for and ideally a company You're looking at is going to meet all Three of these criteria but it's not Always going to be the case but these Are three definite signs that you're Looking at a growth stock and in this Video we're going to be answering a Simple question which is how long should

You expect to hold a growth stock so Let's say you go through you find a Growth investment you like you invest in A particular stock and now you're asking The question of how long should i wait Until i sell this stock so you know the Basics of what you're trying to do You're trying to buy the stock at a Lower price and sell it at a higher Price down the road because we know the Stock isn't going to be paying you Dividends so the only way for you to Make money with this stock is through Asset appreciation or by buying low and Selling higher but when would you Actually decide to sell a stock i'm Going to go through these five right now Now first of all the one that i'm not Even including on the list is one of my Rules of thumb which is anytime i have a 20 20-plus percent return in the short Term i'm talking about in a month or Even in a week it's happened before if You have a quick 20 return something Like that i'm selling i'm going to take That profit off the table and i'm going To consider that a a good day for me or A lucky day for me Anytime you're going to see an explosive Price move like that Whether it's from a company beating Expectations with earnings or maybe They're being bought out by another Company anytime you have a 20 plus

Percent gain in the short term you Better bet that i'm going to be selling And taking that profit but other than That how long should you be holding a Growth stock these are my five rules of Thumb so number one is until the stock Becomes overvalued and i'm gonna use Netflix for an example so let's say you Invested in netflix stock back in 2017 You thought it was an interesting growth Investment and then in 2018 we know that Stock has just gone absolutely crazy as Far as that share price and maybe in Your mind you said you know what it Seems like this stock is heading into Uncharted territories the pe and the Forward pe are sky high i don't think This stock is a good value anymore i'm Going to sell to the optimists that's What the stto is there so if you're Investing in a growth stock you have Money on the table you've made a good Amount of money there or you have a good Return and you feel that that stock is Beginning to become overvalued it's Getting hyped by the market the herd is Entering that investment that is a good Time to sell to the optimists and take Your money off the table Number two is until the trend loses Momentum so if you're investing in a Stock and you find that the trend is Running out of momentum or it's like It's running out of gas and you can tell

That it's having trouble making it to a New price level maybe you're using Technical stock analysis and you see That it's falling to a 20 or a 50 day simple moving average and You're saying you know what i think this Trend is out of momentum that again is a Sign that you might want to sell that Stock number three is when your money is Better used somewhere else and let me Just say this is not if you're losing Money so if you invested in a growth Stock and then you're down 10 15 And you're impatient and you say you Know what i'm going to sell this stock And buy something else that is not the Right move 99 of the time what i'm Talking about is if you have Money on the table you've made a return On that investment but you know that There's more money to be made somewhere Else and your money is better off being Put somewhere else that is a time when You might decide to sell so let's say You're investing in a particular stock In a growing industry but you find out Or you realize there's going to be a Better industry to be investing in and You want to take your money out of this And put it somewhere else that is an Acceptable time to sell a growth Investment but again i'm just going to Repeat myself do not sell and lose money Because you want to be putting your

Money somewhere else due to impatience If you're investing in a growth stock You've already agreed that you're going To allow these stocks to trend upward if You're wrong about this investment and It might be something you have to do so Don't be surprised if you're stuck Holding on to a stock for longer than Expected when investing in growth stocks Number four is when you have long-term Capital gains a lot of people don't Think about the taxes associated with an Investment but i'm sure it makes sense To you to be paying the lowest amount in Taxes possible and that is by waiting Until you have long-term capital gains On your investment so in a nutshell if You hold a stock for less than 365 days Or equal to 365 days you're going to pay The highest rate possible on your Capital gains their short term capital Gains but if you hold it for longer than One year they are now long-term capital Gains and it's going to be a lower tax Rate and depending on what bracket you Fall into it could be as much as a 20 Difference so you definitely want to Make sure that you're recognizing Long-term capital gains if possible and Again this is u.s specific advice so if You're listening to this from a country Outside of the u.s then you have your Own tax situation and i'm not really Sure what that would be for you but if

You're from the u.s then you want to Make sure you have long-term capital Gains as it is a much lower tax rate and Then fifth and finally as far as how Long you're going to be holding that Growth stock it's typically three months To three years maybe you're holding a Stock through the earnings report you Think they're going to do well for Earnings and after they report stellar Earnings you're going to sell or maybe You're trying to ride out a longer trend Over the course of a couple of years but Typically speaking it's going to be About three months to three years that You're expecting to hold on to a growth Stock and in this video we're going to Answer a question or it's like a heated Debate that i see time and time again of What is the best type of investment to Get into should you invest in Value investments of large companies you Know blue chip investments should you Invest in large cap mega cap growth Investments or small cap growth Investments and what i'm trying to show You in this is that everyone is right And nobody is right at the same time At the end of the day as i'm sure you Can imagine the best strategy to have Looking at numbers like this is to own a Little bit of everything have a little Bit of value side to your portfolio with Some large cap blue chip stocks and then

Maybe have some mega cap growth stocks In there you're talking stocks like Facebook uh stocks like google amazon And also have some small cap growth in There as well so time and time again What you're going to find looking at the Numbers is that diversification is going To win out by owning a little bit of Everything you're going to have the best Possible return because sometimes mega Cap growth stocks are going to be better Sometimes value investments are going to Do better those blue chip stocks you Know the dividend stocks and sometimes Small cap growth stocks are going to be The winner and that's what i plan to Show you here looking at these numbers Here and this should help you determine Whether or not you should be investing In growth or value and my hope is that After seeing this you decide to invest In both but what we're looking at here Is the performance of the dow jones Industrial average as well as two Vanguard index funds one is vbk which is A small cap growth index fund and then The other is mgc which is a mega cap Growth index fund so we're looking at Mega cap stocks which are very large Companies high or large market Capitalizations that's like stocks like Amazon stocks like google The big companies facebook stocks like That the mega cap growth stocks and then

Small cap growth is going to be all These smaller companies that are growth Stocks maybe we're talking about a stock Like planet fitness or a stock like Fitbit something like that we're talking About smaller companies so just so you Understand the difference between these And we've already talked briefly about The dow jones industrial average but Those are 30 large well-established Financially stable companies that have Been around in most cases for decades if Not centuries so let's go ahead and look At the performance of these funds and Also the dow jones industrial average to Try to determine what the best strategy Is so over the last year we saw an Eighteen point eight percent return with The dow jones industrial average over The last five years we saw a 70.6 Percent return with the dow jones Industrial average and over the last 10 Years we've seen a 92.7 return with the Dow jones industrial average now looking At small cap growth stocks looking at The bbk fund over the last year we've Seen a 22.7 return from that fund over The last five years a 70.2 percent and Over the last 10 years a 179 percent Return from that fund And then we look at the mega cap growth Fund mgc over the last year it has Returned 16.9 percent over the last five Years 77.4 and over the last 10 years

109 So what you should be gathering by Looking at numbers like this is that It's not the same In the same time frame you're not going To see the dow jones industrial average Performing better than these all the Time you're not going to see small cap Performing better than mega cap all the Time it's going to be different Depending on what time frame you're Looking at so over the last year small Cap growth was the best performer the Dow jones industrial average came in Second place and the mega cap growth Fund came in third place but over the Last five years the mega cap growth was In first place it went from last place Over the last year to first place over The last five years so then you have Mega cap growth being first the dow Jones industrial average being second And small cap growth being third so it Completely reversed itself over the last One year versus the last five years and That right there should be enough to Show you you should have all of these Things you should have some large cap Growth some small cap growth and also Some good value investments so this is All i'm trying to show you guys here is That a blended approach of all these Things is going to be the best strategy And then over the last 10 years small

Cap growth has been the clear winner Mega cap growth was in second and the Dow jones industrial average was in Third so the takeaway from this is that When you hear people arguing about their Investing strategy being better that They say oh i only invest in small cap Growth or i only invest in the dow jones Industrial average companies or i only Invest in mega cap growth you can just Take a step back and laugh at them and Understand that a blended strategy of All of these things is going to be the Best thing for you but you're going to Find a lot of people have their opinions About what you should be investing in And as always guys the best thing to do Is to be diversified and in this video I'm going to be introducing you to a man By the name of the value-oriented growth Investor and i really want to just Introduce you to this concept because i Have a feeling this is something that Will interest you when i first stumbled Upon this concept or this idea and Really it's very simple but this idea That you can use fundamental stock Analysis to analyze growth stocks it was Like one of those light bulb goes off in My head's moments where i was like i can Combine both of these strategies and Become a value-oriented growth investor So what does it mean to be a Value-oriented growth investor well i

Pretty much have a couple of different Things here i want to cover or four main Points So as a value-oriented growth investor You understand fundamental stock Analysis and if you guys haven't taken Fundamental stock analysis 101 i would Highly recommend doing that to get some Of the basics under your belt but as a Value-oriented growth investor you Understand you can use the principles You learned through fundamental stock Analysis when looking at both growth Stocks and income stocks so just like we Talked about Looking at things like the dividend Coverage ratio and studying the company Fundamentals and whatnot you can use all Of this while also looking at growth Stocks now yeah growth stocks are not Going to be typically paying a dividend But you can look at things like the p e Ratio the forward p e ratio the peg Ratio and really understand whether or Not the valuation makes sense today and If it's a valuation you are comfortable With so many people go out there and Just buy into the hot growth stocks Because let's be honest these are the Most exciting companies out there They're doing the most they have the Most innovative products or services and They're really exciting to get behind Everyone was super excited to say

I'm buying into tesla i own shares of Tesla stock it was very sexy to say i Own tesla rather than saying i own Shares of 3m it's boring but you have to Understand that with a stock like tesla You have to understand a lot of that Future growth is priced into today's Number and when you start to see snags With what's going on with them because At the end of the day no company can Execute with perfection forever that's When you start to see that share price Fall so you have to take a step back When looking at a growth stock and say Even though i'm super excited about this Company does the valuation make sense And at that point you have become a Value-oriented growth investor now the Other thing you understand is that Growth stocks can become overvalued They're very prone to becoming Overvalued because it's easy to get Excited today about what's going to Happen tomorrow you hear about companies Getting involved in artificial Intelligence or autonomous driving or or Who knows what but all this future Technology it's very exciting but that Doesn't mean it's going to turn into a Reality or it may not happen as quickly As they believe it is going to happen And all of that is going to cause that Share price to fall if all that future Growth is priced into today's number at

That point a stock becomes priced for Perfection and you're not going to see Many companies out there executing with Perfection maybe they're going to Execute with perfection for a period of Time but at a certain point they're Going to hit a bump in the road and it's Going to cause that share price to fall The other thing you understand is just Basically you look at the numbers and You say is this something that i am Comfortable with Are you comfortable investing in a Company with a pe of over 100 or a Forward pe of over 50 or a peg above Three whatever your criteria is you have To set that criteria for yourself and Say i'm not going to go beyond this i'm Not comfortable with a stock with a Triple digit p e ratio or a forward p e Ratio of 50 or 40. whatever your number Is you have to figure out what your Comfort zone is and at what point you Have to say look this just doesn't make Sense yeah i'm excited about this Company i'm excited about where they're Heading but i just cannot get behind the Company at this current valuation and at That point in time maybe you make the Decision to invest in something else or You're just gonna wait for the right Time to buy that just because you're not Buying this stock today doesn't mean you Can't buy it tomorrow or three months

From now or six months from now and if You find a slack that's priced for Perfection it's a good idea to wait for That stock to go into a correction Before you add shares to your portfolio And the other thing you understand Fourth and finally is that you do not Buy a growth stock when all of the Anticipated growth is priced into Today's number and how do you determine This by conducting fundamental stock Analysis looking at the numbers And saying am i comfortable with this Valuation so you know that it's not wise To buy stocks that are priced for Perfection you don't want to buy the Stocks that everyone's buying into at That point you're following that herd Mentality and you don't want to be doing What the herd does you want to be doing Pretty much usually the opposite of what Everyone else out there is doing so if You hear about everyone and their Brother getting into a particular stock Or asset that might be a time when you Say i think i should probably get out of That or stay away from that you kind of Want to unearth the gems that people are Overlooking and if everyone is super Excited about tech stocks and Semiconductor stocks maybe it's a time For you to avoid that sector entirely But that's pretty much the idea here That i want you guys to think about

Maybe you do decide that you just want To invest in the stocks that everyone Loves and you just want to invest in the Fang stocks that's what's hot right now Or the semiconductor stocks that those Are what did really well you know in 2017 but you just have to keep in mind That these stocks are going to become More and more overvalued with time as The herd moves into that asset and you Just have to be aware of that and set Limits in your mind of where you would Sell if things were to go south or what Kind of gain you're looking to get from That investment but i hope that a lot of You guys understand the appeal of being A value-oriented growth investor and you Understand the idea behind not buying Into growth stocks that are overvalued Or over hyped and in my opinion this is Going to be one of the most important Videos of this entire course so i hope You guys pay attention take some notes Or revisit this once in a while when You're looking to find a growth Investing opportunity so this is a very Reasonable question yeah we've talked About some of the basics here about what Growth stocks are what to look for being A value-oriented growth investor but how Do you actually find a growth stock how Do you find a company growing faster Than the overall market that's what We're going to talk about in this video

Is how do you find these opportunities Now in my opinion it primarily comes From three different avenues you have to Look at the political environment the Economic environment and then the social Environment and looking at all three of These things you can determine what Industries or sectors are going to be Experiencing more or less growth so Let's go ahead and talk about this more And we're going to use some examples as We go through this but first of all Political is party based in in the United states it's based on what President has been elected so we know Right now donald trump has been elected And he has certain stances on certain Issues and each president is going to Have a different set of issues or areas They want to direct their attention Towards so what you want to do Is look at the particular person in Office and say okay are they republican Are they democratic and what is it they Want to be changing and where will they Likely be directing government spending Towards so first of all we know that Trump believes that climate change is a Myth so maybe renewable energy stocks Would not be a good thing to invest in Right now because of the fact that the Political party in office does not Believe in renewable energy so do you Think they're going to be getting a lot

Of grants or money being put towards Research of renewable energies and Technologies probably not so that's what You want to look for is what this party Believes in what their stance is and What to look for and what to avoid now Number two we also know that trump has Significantly increased the defense Spending budget so you might say i'm Going to look into companies like boeing Or lockheed martin because these Companies benefit largely from an Increase in government defense spending Number three we know that trump wants to Abolish obamacare so maybe private Health insurance companies like united Health are looking like an appealing Option right now now united health is Not what i would call a growth stock They're a large cap they're more of a Dividend stock or a blue chip stock but These are just things you want to look For is the larger trends that are Happening around you and like i said Here a lot of it is political based and Party based and then number four we know That trump wants to take care of our Aging infrastructure so maybe some Material stocks like vulcan materials or A stock like caterpillar would be a good Choice because these are stocks these Are companies that will benefit from an Increase in the infrastructure budget And updating our aging infrastructure in

This country and i know a lot of people Who are watching this are not from the United states but you can do the same Thing wherever you live just look at Whoever has been voted into office and What is their stance on things what are They likely going to be directing Spending towards now number two we look At the economic environment and we ask Ourselves are we in a good economy or a Bad economy and based on that we can Decide whether or not we want to be in a Cyclical industry or a defensive Industry now cyclical industries are Heavily affected by the underlying Economy because these are typically Discretionary expense items these are Things like your iphone or things like Restaurant spending or travel you don't Have to spend money on these things but When we're in a good or prosperous Economy and people have extra money You're going to see a lot of money being Directed towards these businesses but Then again when we see a poor economy When we see a bad economy and people Don't have extra money they're not going To be spending money on travel or Iphones or restaurant spending so in a Bear market or in a bad economy these Stocks are going to typically do very Poorly so what you can do is take a step Back and say okay what is it looking Like is going on in the economy are we

Likely going to see a bull market Continuing or is there threat of a bear Market coming in and as a result you can Decide whether or not you want to invest In cyclical industries or defensive Industries and you can potentially find Growth opportunities in both and these Defensive industries typically these are Like our consumer staples or things We're buying no matter what these are Non-discretionary expense items and You're typically going to see the same Amount of money being directed towards These industries in both a good economy And a bad economy so that's the economic Side of it it's the whole picture of What is the economy doing do people have More money in their pockets or do they Have less money in their pockets and What is likely going to happen in the Future is it going to stay this way for A while or do you think we're due for a Market correction and for an overall Bear market and poor economic times That's what you kind of want to consider And then third of all we look at the Social side of things and this is my Favorite way to look for potential Growth investments is looking at the Social environment or the spending Habits and i always look at the young People i say what are the young people Doing with their money what are people Doing with their money and then finding

Potential opportunities based on that so First of all we know that millennials in Particular spend a lot of money on Dining in fact a lot of young people Spend more money on dining than they Spend in the grocery store and so maybe Some restaurant stocks are looking like A good pick at that point in time Knowing that number two we know that People are spending more money on travel Maybe you're looking at a stock like Booking.com they do all the hotel Booking websites and third of all we Know that this stay at home culture is Very popular now of staying at home and Having everything brought right to your Door so maybe you're going to look at a Stock like amazon or grubhub as a result Of that but basically what you're Looking to do here is look at the Political economic and social Environments and determine what is going To be going on within each one of these And what companies will benefit and what Companies might not do so well as a Result of this and then you're going to Look for potential growth opportunities Now later on we're going to talk about How you kind of do this by going broad And then narrowing down so it's easier To find a breakout industry and then Find a good growth investment than it is To just cherry-pick an investment out of Nowhere so maybe you don't know exactly

What restaurant or travel stock you Wanted to buy for example but if you did Believe that the travel industry or the Dining industry was going to continue to Do well restaurants and dining then you Might decide you want to invest in a Company that is within that industry or Sector but you don't know exactly which One that is yet we're going to talk About that more later on and in this Video we're going to be talking about Mega trends or another opportunity to Find potential growth investments now i Just want to warn you guys this is where You can get into the territory of the 100 plus p e ratio or the sky high Forward pe or the astronomical peg ratio Because these are usually the very Exciting industries that a lot of people Are investing in people get really Excited about the potential growth Opportunities and then like we've said Before all of that anticipated growth Gets priced into today's number but one Of the ways you can find potential Growth investments is by looking for Mega trends and these go beyond the Social economic and political Environment because these are moments That make you say this changes Everything from here going forward Everything changes in the past this was Things like going from fat screen tvs to Flat screen tvs or the invention of the

Microwave things like this where it Changes our lives forever that is Another thing you can look for as a Growth investor is look for mega trends Or these moments that make you say this Changes everything but again keep in Mind these are industries where people Get very excited about these future Technologies and they can become very Overpriced and overvalued but there are Potential opportunities here if you're Looking for growth investments and i Want to give you guys seven examples of Mega trends that i see right now and There may be other ones that you see as Well and you can find potential Opportunities within these but again Keep in mind these are things where We're not there today these are Typically five ten years down the road So this might be a longer term growth Investment if you're going to invest in A company that will benefit from one of These mega trends but first of all let's Talk about datification the fact that There is massive amounts of data being Collected now and what are two companies That would benefit largely from this It's facebook and google two of the Biggest data companies out there so if You believe that data is going to become The world's most valuable resource and There's going to be more and more data Collected then you might want to bet on

Two data companies and look at companies Like facebook and google Number two let's say you believe in iot Or internet of things where you're going To have devices being connected to the Internet And you think that everything out there Is going to be connected to each other And be able to communicate with each Other you might decide to invest in Companies like cisco or texas Instruments companies that will benefit From this growth in iot number three Let's say you believe in artificial Intelligence you think that is the next Big growth Industry and you want to get behind a Company that's involved in ai and you Like nvidia as a result number four Let's talk about autonomous driving a Lot of people believe in that they think That's going to be the future and that Maybe 5 10 15 years from now nobody's Going to be driving and it's going to be The cars driving themselves that's Probably going to happen it's just a Matter of when and so a lot of people Have gotten behind tesla because they're The biggest company out there involved In autonomous driving but like we've Said here that that future is largely Uncertain and it's not going to happen Overnight this is a big problem that They're trying to solve and there's

Going to be snags and bumps in the road And so that's kind of what happens is People believe in a breakout industry or A new industry like autonomous driving They get really excited they buy shares Of a company like tesla and then when Things are not going perfectly and that Stock is priced for perfection you start To see that stock price fall or that Share price fall but if you believe in Autonomous driving you might decide to Invest in a company like tesla number Five another one is the fact that people Are living longer than ever before and We're seeing a growing population of Senior citizens So they're going to need transportation They're going to need living facilities And so maybe you look at a company like Ensign group i think this is a reit Correct me if i'm wrong we can look into That in the group there but this is a Company that i believe owns senior Living facilities and so if you think There's going to be growth there as a Result of there being more senior Citizens that seems like a logical Conclusion to me if we're going to have More senior citizens they're going to Need somewhere to live and so investing In a company that builds or owns senior Care facilities might not be a bad idea Let's say you are believing in 3d Printing being the future and you invest

In a company like autodesk or number Seven a bigger one is the globalization The fact that companies are operating on A global level And no longer are there big barriers Between countries everyone's operating Together and so you might decide that You want to invest in international Markets to be a more global investor Instead of being somebody who invests Only in companies that you live in and Having that hometown bias of being an Investor in only u.s companies so this Right here is another thing you can do To unearth potential growth Opportunities is pick up on these mega Trends or where we're going to see Massive amounts of growth or these brand New industries and either there are a Lot more than this this was just a few That i could think of off the top of my Head but there are a lot of good Opportunities that lie within but again Keep in mind this is where you're going To find oftentimes stocks and companies Getting overpriced and over hyped just Due to the fact that this is some very Exciting stuff when we're talking about Artificial intelligence and iot and Autonomous driving so just be careful And keep in mind the idea of being a Value-oriented growth investor and that Should keep you out of trouble in this Video here i'm going to be showing you

One of my favorite tools when it comes To identifying a breakout industry and That is the fidelity sectors and Industries overview tool now you don't Need to have a fidelity account to my Knowledge to use this i don't have a Fidelity account but all i do to access This is i go right here to google i type In fidelity sectors and industries and For me it's the top results here the Sectors and industries overview And what this does is it breaks down an Overview of the performance of these Sectors and then if you want more Information about these sectors to see The industries you can hit the plus sign And it will give you all of those i'm Going to go ahead and zoom in here Though i think this is a little bit hard To see so just bear with me quick that Should be a lot better now But so anyway i know i've talked about This in the past sectors versus Industries but a sector is a broader Term and an industry is a more specific Term as far as uh business segments and So for example let's use consumer Discretionary that would be a sector and So first of all we can get the Performance of the sector uh this is the Percentage change for today this is the Market cap or the value of this sector And the one-year percentage change is What i'm really focused on and so let's

Say we were interested in consumer Discretionary and we wanted to look at The industries within this sector it Says there are 12 industries and if we Hit the plus sign it'll tell us what Those are so i'm not going to read all These here but you know it's got auto Components it's got hotel restaurants And leisure media textiles apparel and Luxury goods so What you can do is first of all if You're looking at this here and you're Trying to work from top down you're Looking to find a sector that's in favor And then look at that and find a hot Industry within that sector Now again this comes down to what are You looking for you're looking for the Red hot industries or are you looking For an industry with good growth Potential it's not necessarily on Everyone's radar It really comes down to that but if we Look at the numbers here obviously Information technology is red hot They're up 26.29 percent um let's see Here other than that we're seeing growth With industrials we're seeing growth With financials and consumer Discretionary Now for this example we are going to be Using information technology so let's go Ahead and look at what industries are Within the information technology sector

And as you can see we have Communications equipment electronic Equipment instruments and components i t Services internet software and services Semiconductors and semiconductor Equipment software and then technology Hardware storage and peripherals so i Don't want to be going after the red hot Industry here this is a very hot sector The information technology sector but The top ones in here are software and Semiconductors and so i actually decided On it services for this example here so We're going to go ahead and say that We've looked at these different sectors And we want to go ahead and find an Investment within the i t services Industry so what we do is we click on This and this is going to give us more Information about this particular Industry so what we're looking to do Here is scroll down and take a look at This graph here this line chart shows us The performance of this particular Industry versus the s p 500 and it looks Like this industry began to break out Back around 2017 But it's kind of hard to tell so let's Go ahead and look at a longer span of Time we'll maybe even go five years um So looking at the last five years you Can tell here that the s p 500 was Actually outperforming this industry for A long period of time

And then somewhere around 2017 october Of 2017 this industry began to break out Above the s p 500 now what i like about This is you can get so much information Here so first of all Over the last five years we know that i T services has returned 78.4 percent Meanwhile the s p 500 has returned 68.5 So it's outperformed over the last five Years Over the last three years it has also Outperformed we have a 50.1 percent Versus a 28.32 return from the s p 500 And here it's a little easier to see When this get began to break out above The s p 500 looking at the three-year Chart and probably even easier looking At the one-year chart it happened Actually it looks like somewhere around July this industry began to break out And over the last year like we said here 26 percent 26.1 return versus a 11.9 Percent return from the s p 500. so what We can gather here Is that this industry seems like a newer Trend here this trend with it services Hopefully it still has some momentum and If this was something that interested You you might decide okay i want to find A potential investment within the it Services industry now beyond that if we Scroll down here we get some very useful Industry fundamentals starting off here The price to earnings ratio

And last year's gaap uh Actual is just going to be like similar To your 12 trillion months and then the Pe for this year's estimate is Incorporating some of the forward data As well And then the enterprise value i believe That's just the average value of the Companies within this industry Uh earnings per share the dollar amount Average earnings per share of these Companies the earnings per share growth On the 12 trillion months versus the 12 Prior trailing months Same thing with revenue growth and then You have the return on equity percentage On average return on investment average Uh debt to equity and then the average Dividend yield and so we're going to be Using this data in a little bit but Now what i want to show you is let's say You decide you want to invest in a Company in the i t services industry how Do you find investments well if you Click on this here this is where it Begins to prompt you to login to Fidelity and i don't have a fidelity Account so i've never used this tool if You do have a fidelity account let us Know in the facebook group if this is a Tool you have used but Pretty much what i do is look up it Services companies and so That's what i did here and i've stumbled

Upon this article here from Cio.com i'm not sure what this site is But it said it outlined the top 10 it Service providers of the year and this Is from everest group 2018 they must be Some kind of analysis group And so i took these 10 companies and i Started a spreadsheet down here and Maybe you guys want to use excel maybe You want to use google docs whatever Your preference is but i jotted down These companies and a number of them Were non-us companies and so i wasn't Able to gather much data uh specifically Market cap is difficult to compare Because you're gonna have to convert the Currencies but what i did is i went Ahead and wrote down these companies i Grabbed the one-year return from this Stock the p e ratio the forward p e Ratio and then the price to earnings to Growth ratio the market capitalization And based on that information i Determined what type of investment this Was so first of all We have a censure here they've had a 26.4 return we had tata consultationary Services at 21.1 return um cognizant had A 37.9 return we pro had a 4.2 Return now ibm might be an interesting One here as well this is one of those Dow jones industrial average stocks more Of a value investment here they're down 12.5 percent over the last year

Hcl technologies up 12.8 infosys up 15.5 And dxc technologies was the top Performer on this list at 44.8 And ntt data at 6.3 percent now i just Went and looked at one resource here and Because this was the top performers These are probably the largest i.t Services companies and if you were Looking for a small cap growth Opportunity you would want to do some More research and find some smaller Companies that might not be making the Top of the list but basically what i did Here is looking at that industry Fundamentals page i grabbed the industry Average uh p e ratio And then the one year return And one of my cardinal rules here i look For is i want to invest in a stock for a Growth investment of a stock that has Outperformed the industry And the three stocks on this list that Have done that are accenture Cognizant and dxc technologies and so Those were the ones i focused on going Forward so first of all accenture or Accenture had a pe of 26.8 that's lower Than the industry average a forward p e Of 20.7 and a peg ratio of 2.1 they had A market capitalization of 96.3 billion Making this a large cap growth Investment Now cognizant had a 37.9 percent return They have a much higher p e ratio now

But their forward p e ratio is a 15.8 With a peg of 1.3 So what that tells me is that this Company is going to be experiencing a Lot more growth going forward or they at Least have a lot more anticipated growth Because A lot of that growth is priced in today With a higher pe than the industry Average at 32.1 but a forward pe of 15.8 And a peg of 1.3 is very reasonable Now this company had a market cap of 47 Billion making them a mid to large cap Growth investment and then i also Included ibm on the list here they have A pe of 25.2 but a forward pe of 10.9 The lowest one on the list here but a Peg of 3.8 that's not very appealing but The forward pe is quite low if i was Going to be considering investing in ibm I would do some more research uh and try To figure out looking at the numbers Whether or not this company is going to Be experiencing growth or what exactly Is going on and why that peg ratio is so Inflated but because they have a market Cap of 138 billion and they're on the Dow jones industrial average and they Pay a dividend i didn't include that on This list but that's something you might Want to include as well this is a large Cap income and growth investment so this Would be more of a blended strategy And then finally we have dxc

Technologies the top performer with a p E of 24.6 and a very low forward p e of 11.3 and a peg of 0.29 this might be a Very attractive investment if you're Looking at it services and with a market Cap of 29.2 billion they're a mid to Large cap growth investment so we're Actually going to be using accenture as Our example here for further analysis But if i was doing this and i was Actually investing in an i.t services Company i would do this research on all Of the ones that i highlighted here i Would also do it on cognizant and dxc Technologies so first of all let's take A look at the earnings per share and the Industry average earnings per share over The 12 trailing months was three dollars And 34 cents and on the left i Highlighted this for accenture and it Was And sixty four cents so the earnings per Share are significantly higher than the Industry average now let's look at the Earnings per share growth and uh for the Industry average it was fifteen point Seven eight percent and uh down below That you can see that for accenture is 11.9 percent so the quarterly earnings Growth was actually a little bit less Than the industry average and then let's Look at the revenue growth and the Revenue growth average was 16.16 percent For the industry and for accenture that

Was 11.8 percent Now one thing i will say here is that The industry average statistic is using The 12 trillion months versus the prior 12 trillion months and looking at yahoo Finance this is just quarter over Quarter from this most recent quarter to That quarter one year ago and so if you Did want to get a more realistic figure Here you could very easily calculate This by looking at the quarterly Earnings per share data and revenue data For accenture and then calculating both The earnings per share in revenue growth From the 12 trailing months versus the Prior 12th trailing months and that Might give you a more realistic figure Because i'm not sure if this is an Industry that is cyclical in nature but If so that means there may be quarters That are better or worse than others and So you might have some quarters that are Seeing less growth and so if you wanted To see a more realistic figure you might Want to sit down and calculate that Yourself just by getting the quarterly Earnings per share in revenue data and Figuring out what the growth is over the Last four quarters versus the four Quarters prior to that now the industry Average return on equity was 29.55 percent and accenture had a much Higher return on equity at 41.99 Which is definitely a plus and then the

Final thing i'm going to look at is the Dividend yield uh the industry average Dividend yield is a 1.42 And for censure that is a 1.64 And then the final thing i want to look At is the dividend yield so the average Dividend for this industry is a 1.42 Percent and accenture pays a dividend of 1.76 So they actually have a higher dividend Than the industry average But that is pretty much the process here Of identifying a breakout sector Deciding on an industry finding Potential investments and doing some Very basic fundamental analysis now Would i at this point invest in Accenture i would not i would do a lot More research i would then look at Things like the dividend history i would Look at more of the fundamentals i would Look at the balance sheet do some Analysis of the financial documents and Read the annual report and go into more Analysis like that but this is basically Where i will narrow down my search And decide what companies i want to Actually focus my research on and in This video i'm going to be teaching you My cardinal rule when it comes to growth Investing and also just outlining the Sequence of events of the logical steps You would take if you were looking to Invest in a growth stock or a growth

Investment now this rule is very simple And it goes like this you invest in a Strong company in a growing industry now Yes like i said it's also important to Be a value-oriented growth investor and Avoid getting into industries that are Over hyped but this is pretty much the Cardinal rule and if you follow this it Should keep you out of a lot of trouble When it comes to investing What this comes down to is make sure You're investing in an industry that has Growth potential and invest in a strong Company and i want to explain that i'll Explain a little bit more when we go Through this list here and then this is Just the steps you would take if you Were investing in a growth investment so First of all you got to find a growing Industry and we just went over the Fidelity sectors and industries tool i Like using that one you might have other Options out there that you like yourself We talked about political social and Economic environment you can use those To determine a breakout industry or Identify one or third of all you might Be looking for a mega trend a moment That makes you say this changes Everything and you're looking to Capitalize on that so once you've Determined a breakout industry the Second thing you want to do is find out What companies are within that industry

And this can be easier said than done Oftentimes what i'll do is i'll find an Index that tracks that industry maybe It's food and beverage maybe it's dining Hotels and restaurants whatever it is I'll find an actual index that tracks That industry and then i will find out What companies are involved in that Index and that's oftentimes a good way To determine what companies are involved In that industry so once you've done That i say you identify the leaders of That industry first of all look for the Blue chip giants the large Well-established financially stable Companies now are you going to invest in That blue chip stock it depends are you Looking for a a mega cap growth stock or A small cap gold stock it really comes Down to that but my rule of thumb is to Be a strong link investor and what i Mean by that is i think it's better to Invest in the industry leaders and not The industry followers because when you See a trend taking place you're going to Have certain companies leading that Trend and you're going to have other Companies riding the coattails of that Trend that are just hanging on for the Ride and so in my opinion it's going to Be better to invest in a strong link Company and not a weak link company And this again comes down to this idea Of do you want to be the strongest link

Of that chain or the weakest link of That chain what what would you want to Invest in and i would always say it's Better to be a strong link investor now Once you do that and you identify the Leaders that's when you're going to Analyze the fundamentals and ask Yourself is this a valuation i am Comfortable with look at the things like The p e ratio the forward p e the p e g The growth potential look at the growth Of the earnings and revenue and all of That and ask yourself am i comfortable With getting behind this company at the Current valuation if the answer is yes You can move forward if the answer is no You're just going to put that stock on Your watch list and wait for the right Time to buy Number five you're going to plan your Investment you're going to say okay i'm Going to buy shares at this price i'm Looking to hold this stock for six Months or one year or two years have an Idea in mind of how long you're looking To hold on to this stock number six You're going to find an optimal entry Point and you may decide to do this or You may not but if you want to learn More about this we have technical stock Analysis 101 right here in the stock Radar group Nicholas j paris a close friend of mine Put together a whole course on technical

Analysis and you can use technical Analysis to identify optimal entry Points for position looking at the Candlestick charts and looking at Support and resistance areas so if you Really want to go all the way with this You may decide to use technical analysis Look at the candlestick charts and Identify the optimal entry point and Then number seven finally you're just at Some point going to execute that order You're going to enter that position and At that point you sit back and you relax Because you did all the work beforehand And hopefully you know you made a good Investment hopefully you didn't get in Over your head by investing in Over-hyped industry but at that point All of that has been done previously and You shouldn't really worry after that About your investment you did your Research you did your due diligence and If you're following all these cardinal Rules like investing in companies and Businesses you understand And not buying into the overhyped Industries you should really have Nothing to worry about at this point in Time but anyways guys that is it for This video that is my number one rule There investing in a strong company in a Growing industry and this would be the Logical sequence of events if you were Looking to invest in a growth investment

But that's all i'm looking to do in this Video is wrap up with the key ideas we Covered in this course and the main Takeaways you guys should have from this So number one first of all avoid the red Hot stocks in industries this is often Times where you're going to find Companies trading at a sky high p e Ratio and so if you're looking to be a Conservative growth investor and not an Aggressive growth investor you're going To want to stay away from the red hot Industries and red hot stocks Again that just comes down to avoiding The herd mentality if everyone's moving Into a particular asset that is Typically when i say all right i'm going To take a step back from that i'm not Going to be investing in that just yet Number two i would keep in mind having That value-oriented approach of being a Value-oriented growth investor where you Take some of the principles of Fundamental stock analysis and apply Those to your growth investing strategy And invest in growth stocks that are Fairly valued or even undervalued number Three i would say beware of stocks that Are priced for perfection again this Happens when people get a little bit too Excited about a particular stock or a Particular industry and then as a result All of that future growth that company Is expecting to have gets priced into

Today's number and then if that company Operates and they have a setback you're Going to see a major correction taking Place with that stock because that stock Is priced for perfection and rarely do We ever see companies executing with Perfection for a long span of time Number four Follow the cardinal rule of investing in A strong company in a growing industry Like we said do you want to be investing In the strong link companies or the weak Link companies and i would always say Invest in the strong link companies Those that are leading the trend and not Following the trend Number five is to include both small cap And large cap growth stocks we saw that Looking at the historical performance That sometimes small cap outperforms Sometimes large or mega cap stocks Outperform and so it's best to have a Blend of both of these Number six we said that the blended Strategy is also good in terms of having Both Growth investments and value investments If you're looking to be investing in Some income stocks some blue chip stocks As well as some growth stocks because Like we said at some point in time you May see the dow jones industrial average Outperforming growth stocks or you may See growth stocks outperforming the dow

Jones industrial average and so you like We said you have people argue about what Strategy is best and uh what works best For most people is to do a little bit of Everything and be well diversified Number seven is pay attention to trends We talked about number of different Trends out there we talked about the Social economic and government Trends that you can find we talked about Mega trends and all these different Trends you can find and then look for Potential growth opportunities within Them and then finally when in doubt About investing just wait for a sale if You're interested in a stock that's in a Red hot industry or they're a red hot Stock right now wait for the stock to go On sale it might take a while but i Guarantee you it's going to happen don't Be investing in stocks that are at all Time highs you're gonna want to invest When the stock has gone into a Correction or a bit of a sell-off you Don't want to be investing in a stock When it's flying into uncharted Territories that's just common sense at The end of the day of uh not buying high And selling higher the idea is to buy Low and sell high and people who buy High are often buying when the trend is Losing momentum and they end up being The biggest losers at that point when That stock falls and goes into a

Correction so when in doubt wait for a Sale