Stock Market Today

Growth

Growth investors focus on one aspect of a company: its potential for earnings growth. They believe that companies with high earnings growth will see their stock price continue to increase, since investors will want to own profitable companies that can pay large dividends in

the future. The number that they pay the most attention to is earnings per share, especially how it changes from year to year, although they sometimes look at revenue growth as well . Some investors also compare the price/earnings ratio with the annual earnings growth, to get a feel for how much the market is willing to pay for a given rate of earnings growth. Growth stocks tend to be from young companies, so they are often riskier than the average security. They have the potential for large gains, but they also have the potential for large losses. In the 1990s technology stocks were the most commonly purchased stocks by growth investors, although growth stocks can exist in just about any industry.

Value

Value investors look for stocks that are selling at an attractive price; in other words, they are bargain hunters. This does not mean that value investors buy stocks because they are “cheap” (such as penny stocks); value investing utilizes several measures of a company’s value to identify stocks that can be purchased for less money than they’re worth, regardless of whether they’re worth $10 or $100. Although it’s possible that a growth stock could represent a good value, growth investing and value investing are usually considered opposing strategies. This is because value investors tend to focus on traditional valuation metrics such as the P/E ratio, looking for low ratios which are typically not found in growth stocks . Value stocks often are ones which have fallen out

of favor with the investment community for one reason or another, perhaps because they are in a slumping industry or because they reported poor earnings.

GARP

If you’re torn between the growth approach to investing in stocks and the value approach, then you might want to consider trying the GARP approach. GARP stands for “growth at a reasonable price” so, as you might expect, GARP investors look for companies with growth potential whose stock price is undervalued. That can be a difficult task since growth and value stocks tend to have opposing characteristics, but it’s not impossible. Most GARP investors look at the price-to-earnings-growth ratio (PEG) ratio in order to find bargain stocks with growth potential that are selling at a reasonable price .