Pay for the future — not the past
Value investors look backward — what does the company earn now? Growth investors look forward — what can the company earn in five or ten years? Growth investing is about identifying companies early in a strong growth phase and holding them while the growth continues.
"Those who see the future clearly enough and act early enough always harvest the most."— Florence Scovel Shinn
What characterizes a growth company?
High revenue growth
Growth companies typically grow 20-50%+ in revenue per year. Normal growth of 5-10% is not enough to be called a growth company.
Reinvests everything
Growth companies rarely pay dividends — they reinvest all profit to grow even faster. Amazon did not pay dividends for 25 years.
High P/E or no earnings
Growth stocks often trade at very high P/E multiples — or have no earnings at all. The market pays for future potential, not current results.
The most famous growth successes
Amazon
Listed in 1997 at $1.50. Today over $200. An investment of 10,000 NOK in 1997 is worth over 1,300,000 NOK today.
Nvidia
Chips for gaming for many years — then the AI revolution. The price rose over 800% in one year in 2023.
Risks of growth investing
High valuation
You pay a lot for future growth. If growth disappoints — even slightly — the price can fall 50-80%.
Interest rate sensitivity
When rates rise growth stocks fall the most. 2022 was a painful example — Nasdaq fell 35%.
Dot-com warning: In 2000 hundreds of growth companies collapsed with nothing left. Hype is not a business model.
Growth vs. value — not either/or
Growth investing suits
Low interest rates · Technological disruption · Expanding economy · Investors who tolerate high volatility
Value investing suits
Mature economy · Rising interest rates · Uncertain times · Investors who like low risk and dividends
Phil Fisher: One of the greatest growth investors in history. He bought Motorola in 1955 and held until he died in 2004. Selling a good company just because the price has risen a lot is one of the most expensive mistakes an investor can make.
"The future belongs to those who believe in the beauty of their dreams — and who invest in them."— Florence Scovel Shinn