The U.S. economy will be lucky to grow at 3% over the next 10 years. I hope you're aiming to beat that figure with your stock portfolio! If so, here are three strategies to ferret out growth in a low-growth environment and four stocks that illustrate these strategies.
Strategy No. 1: Focus on emerging/ high-growth industries
With a $500 billion market value, there can't be any juice left in Apple
Strategy No. 2: Focus on emerging superbrands
In a 2006 paper titled Brand Matters, two academics and a financial professional looked at the relationship between brand value and stock returns. Their conclusion: "Strong brands not only deliver greater returns to stockholders than does a relevant benchmark but do so with less risk. This finding holds even when market share and firm size are considered." Higher returns with less risk? That sounds like my kind of investment!
I probably consume fewer than two alcoholic drinks per month, on average, but I'm still familiar with Boston Beer's
Strategy No. 3: Focus on emerging markets
Two numbers are enough to describe the growth opportunity for Rosetta Stone
Of course, the very best growth businesses fall under more than one of these categories. LinkedIn, for example, is well-positioned to become the reference brand of professional networking tools. Similarly, Apple is already the world's most valuable brand, according to branding consultancy Brandz.
These principles are straightforward. Why invest in growth stocks? To paraphrase Sutton's Law, that's where the growth is. The challenge is in recognizing a growth stock as such before everyone else does, and thus before it is priced to deliver average (or below-average) returns. You can do so by identifying companies that dominate high-growth industries, own super brands, and have emerging-market opportunities.
Take the first step on a growth path
That happens to be a very difficult thing to do -- don't let anyone tell you differently -- but it's something at which Motley Fool co-founder David Gardner excels. The hundred-plus stock picks he has made over the past decade have, on average, smashed the market, creating real wealth for the members of his services. If you'd like to find out how David's new portfolio service, Supernova, adds the next logical step to this process to help different investors meet different goals, I invite you to enter your email in the box below and you'll receive free access to the SuperNova hub.