Customer Reviews

How To Be A Growth Investor

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The authors explain the difference between growth stocks and value stocks and gives you a list of 13 questions you should ask yourself about the stock before investing in it. The book is short... too short, but it is direct and to the point.

This book is specifically written for those individuals willing to invest the time and resources to develop their own portfolio of stocks. As such, it is not for people looking to better evaluate mutual fund performance, though some information on how to do so is presented. Nor is it a book for gamblers or others looking to dabble in the market for quick profits. The book assumes from the very beginning that the reader desires to make his or her own investment choices as to which stocks to own for the long haul (that is five or more years).

The main goal of this book is to show the reader one way of making stock picks that will be held for the long haul. The approach outlined in the text is essentially top-down and two pronged. The first element of the approach is to find industries with strong growth prospects and then choose companies within each industry that have above average prospects for growth. As for the second element, the book takes a forward-looking or future-oriented approach to growth stock selection, and relies almost exclusively on analyst consensus of earnings growth as the basis for stocks to own. In effect, the authors believe all other decision-making criteria are secondary to projected future earnings growth. Herein lies the biggest fault of the text, as by now everyone knows that projected earnings growth is a subjective criterion, and more importantly, analyst consensus is more often than not a lot of hot air.

However, the book does have a number of good things going for it. The first and most important merit of the book is its bold admission that one must critically research the company before buying its stock, and that there is no getting around this if one wants to make money in stocks, no matter what investment method one chooses to use. The book`s second merit is its insistence that the only way to make good money is to do so over time, to avoid quick gains and numerous trading costs, and compound one`s total return over time.

Yet, I offer to the potential reader one important caveat. Based on the historical data presented in chapters two and three of the book, when comparing growth and value styles to the S&P 500 index, there appears to be only slight differences in performance, with value orientation outperforming the S&P 500 index, and the index outperforming the growth orientation. Moreover, in the same time period, although a few large growth funds managed to significantly outperform the S&P 500 in the short run, on an after tax and fund expense adjustment basis, not a single fund could match the S&P over extended periods of time (that is more than ten years). As a result, based on the data the authors provided (which by the way, they wanted to use originally to show that the individual could construct a portfolio that could easily outperform the fund pros), the surprising and obviously unintentional conclusion is that one would have been better off owning the S&P 500 index than owning a growth and/or value fund (read the book and see for yourself). This conclusion is especially startling when one factors in taxes and managed fund expenses. Incidentally, this is a position further supported by Mr. John Bogle in his thought-provoking book, Common Sense on Mutual Funds.

That said, the book introduces to the reader a fair-weather method for evaluating stocks. I use the perjorative `fair-weather` because this method only works best in rising economies, and falters in sinking ones. However, the book also gives the reader, in general terms, a clearly defined buy and sell discipline. Overall, I think the book deserves to be read by the novice and intermediate investor who may not be entirely clear (as I was) on what the terms growth and value really mean in the investment universe.

This is a terrible book by a fund manager who managed to lose over 30% in kempers so called growth fund over a 3 year period. while most other funds at least kept pace with inflation. Look at symbol KGRAX for more info. Follow her lead and you too can lose your money.