A fundamental approach to investing, the selection of ‘growth’ stocks is a style favoring companies reinvesting earnings, growing revenue, cash flow and profits
As our extensive theme attests, the strategy is popular with investors but, in an effort to stand out and devise more attractive performance / risk profiles in the category, the fund providers have diversified well beyond standard ‘growth’ concepts
Selecting the investable market segment by market capitalization – from mega-cap to small-cap – is a familiar concept and, unsurprisingly, funds focused on small-cap companies are usually more volatile (and exposed to more risk)
The fund providers however have complemented this basic selection with models combining a range of growth factors, based on book value, revenue, cash flow and earnings, with volatility scaling – contributing to sharply differentiated risk exposure in a fairly narrow band of performances
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