Hello. My name is Rick, and I'm a growth-aholic.
Don't bother phoning up Warren Buffett for an intervention. I'm in a good place. My addiction to companies that are growing faster than the market average is not a harmful disease. Done right, it is simply the prescription to superior gains.
This doesn't mean that my investing style is better than yours. I'm not that cocky. The thing is that you probably don't know me. You think that just because I proudly wear the "Hello, My Name Is ... Growth Investor" nametag, I'm the type who will bet the farm on Tripod the Three-Legged Horse at the racetrack because of the long odds.
That's not me. That's not your typical growth stock investor, either.
So, let's go ahead and tear down a few myths today.
1. All high price-to-earnings-ratio stocks are growth stocks.
Growth doesn't mean always mean snapping up the expensive. In 1989, shares of Coca-Cola
Coke is a great blue-chip company, but it's clearly one that would never be able to merit that kind of growth multiple. Case-unit volume has grown in small chunks for the pop star. It's just not the prototypical growth stock anymore. A more fitting growth stock in the beverage market would be Monster Energy maker Hansen Natural
2. Only growth stocks are risky.
I'm not naive. I recognize that growth stocks will be, on average, more volatile than Aunt Minnie's portfolio of utility stocks and convertible bonds. However, there are times when greater chances are being taken on the value end of the spectrum.
Let's look at the computing space. Apple
3. Growth stocks tank in bear markets.
There is a flight to quality when the market's knees start to buckle, but quality doesn't mean a retreat from logic. Temporary setbacks eventually reward the companies that continue to grow during the market lulls.
A fast-growing tech company -- early in its infancy -- can outpace that behemoth of a tech conglomerate that seems to be the object of a migrating market's affections. Three of Wall Street's biggest winners in 2002 (while the S&P 500 lost 22%) were octane-fueled Chinese Internet stocks. One was NetEase.com
4. I'm a cockeyed optimist.
I tend to emphasize the positive as a growth stock investor, but my best investments have come from picking apart the shortcomings of larger competitors. My portfolio has profited from growth stocks such as Netflix
So, yes, I'm upbeat by nature, but even as Mr. Brightside, I have no problem trashing myths to bits.
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Longtime Fool contributor Rick Munarriz occasionally watches Mythbusters. He owns shares in Netflix, a Stock Advisor pick. Coca-Cola is an Inside Value recommendation. He is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.