Growth Investing

Growth investing prioritizes a company's future potential over current valuation. Growth investors buy companies with above-average revenue growth, expanding margins, large addressable markets, and competitive advantages — even if these stocks trade at high P/E ratios that traditional value investors would avoid.

Classic growth stocks include technology companies, disruptive innovators, and companies in rapidly expanding markets. Companies like Amazon, Apple, and Google were considered "too expensive" by value metrics for decades while delivering extraordinary returns driven by superior business growth.

The key metrics for growth investors differ from value investors: revenue growth rate (25%+ annually is strong), expanding profit margins, customer acquisition costs and lifetime value, total addressable market (TAM), and competitive moat. Valuations are typically expressed as price-to-sales or price-to-earnings-growth (PEG ratio) rather than traditional value metrics.

Growth investing carries higher risk because the premium valuation is only justified if growth materializes. When a high-flying growth stock misses earnings expectations or signals slower growth, the stock can decline dramatically as the market reprices it at lower multiples.

The growth vs. value debate is one of the longest-running in investing. In practice, most portfolios benefit from exposure to both. Growth stocks drive returns during innovation-led markets, while value stocks provide stability and income. The market regularly rotates between favoring each style.