Education: Aggressive Growth Investing

Printable Version

There's More to Aggressive Growth Than Technology

The term “aggressive growth stock” conjures up images of many well-known technology darlings of yester-year such as Microsoft, Cisco, Dell, and Oracle. These stocks perfectly fit the profile of an aggressive growth stock as their earnings exploded during the 1990’s, causing their stock prices to post gains well into five-digit percentage level for the decade.

Not Just Tech

However, it was not solely the fact that they were technology stocks that made them gain so much. It is true that the rising technology tide lifted many boats, but to make outsized gains like that, there was something deeper. This is illustrated by the fact that the energy and homebuilding sectors were on fire during the severe bear market of 2000-2002.  

One of the main factors that contribute to “ten-baggers” as Peter Lynch called them thing stocks is a new product that fuels sales and earnings growth. This is one of the common denominators of huge growth stocks over the past several decades. Technology companies are always innovating and pouring money into research and development, so these stocks are natural candidates for hot new products. Here are a few examples:

Three Tales of Tech Success

Apple Computer was on the brink of irrelevance and even needed a cash infusion from Microsoft in the late 1990’s to stay afloat. All of this changed when the IPod was released a few years ago. The stock has increased almost ten-fold from the lows of the last bear market, largely due to the success of the IPod.

Microsoft enjoyed a multi-year run on the heels of their MS-DOS operating system, which had to be used by a vast majority of computers in the world.

Cisco Systems invented the router in a world that was moving towards the internet and networking. The rest is history.

However, companies in a variety of industries have seen huge growth due to the emergence of a killer product, so outsized gains are by no means limited to technology.

Two Huge Non-Technology Winners

Hansen Natural has soared over twenty-fold over the past few years due to its hit new energy drink called Monster. Energy drinks are hardly cutting edge technology or life saving products, but the demand for them is huge.

Taser International saw its stock rise twenty-fold in 2003 based on the prospects of its taser security device.

Broaden Your Horizons to Make Big Money

The take-home message is to be open to all industries and sectors when searching for prospective aggressive growth stocks. Technology always offers a myriad of candidates for huge winners, but so do many other industries.