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Evaluating Some of Today’s Biggest Growth Stocks

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Growth stock investment

Investment in stocks commands consistent discipline and focus. You have to think about the micro and macro outlooks for the company, industry, and economy. Continuously changing dynamics and a rapidly evolving world have resulted in indexes and ETFs that help investors with varied risk appetite to invest in a tailor-made portfolio of growth stocks, value stocks, et cetera. An ideal growth index or ETF should be adequately diversified among cyclical and defensive sectors.

The parameters we look at in a growth stock include commendable growth in net income and pre-tax margins, which play a crucial role in stock price and forward PE (price-to-earnings ratio), enabling a company to continue trading above its intrinsic value.

 

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S&P growth indexes

The S&P growth indexes include the S&P 500 Growth (SGX), S&P 1000 Growth (SPUSTG), S&P 900 Growth (SPUSNG), S&P Composite 1500 Growth (SPUSCG), S&P 1000 Pure Growth (SPUSTPG), S&P 900 Pure Growth (SPUSNPG), S&P Composite 1500 Growth (SPUSCG), and S&P Composite 1500 Pure Growth (SPUSCPG). These indexes were constructed under the common premise of sales growth, the ratio of earnings change to price, and momentum.

Growth stock ETFs

The PowerShares QQQ (QQQ) has 61% exposure to technology. It has a PE of 22.2x and a YTD (year-to-date) return of 8%. The iShares Russell 1000 Growth ETF (IWF) has 39% exposure to technology. It has a PE of 26.8x and a YTD return of 4.8%.

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