Wednesday, September 21, 2022

Picking Growth Stocks With Investor-One Portfolio

Growth stocks are good additions to our portfolio to boost our investment returns over the long term. Most of the stocks in our portfolio will be average or even loss making but there may be 1 or 2 super growth stocks in our portfolio which boost our returns significantly. 

An example of a growth stock is Netflix which grew by 145x if you invested in 2003. $10,000 invested in 2003 would be worth $1.45 Million now. Its a long 19 years but still the returns are exceptional at average of 763% annually. Another growth stock, Tesla grew by 146x in 10 years from 2012 to 2022. $10,000 invested in 2012 would be worth $1.46 Million now. While these growth stocks would have given our wealth a significant boost, the issue is always how do we pick winning growth stocks?

For Singapore market, there are also growth stocks. An example is iFast which grew 8x in just 2 years from 2020 to 2022. $10,000 invested in 2020 would have grown to $80,000 in just 2 years. The price of iFast have since retreated down but the returns are still about 4x-5x. 

Investor-One, a website by ShareInvestor, has a portfolio feature where their research team manage a portfolio of stocks which are focused on growth. They select stocks based on a a set of fixed financial parameters as seen below:

These financial metrics seems reasonable to find undervalued companies which are not big market cap and with strong financial standings. Most of the companies which grew tremendously over the years had small market cap back then and they slowly grew to become big market cap companies such as Netflix. 

On the Investor-One portfolio page, you will be able to find stocks which are in their portfolio and their recent buys for this portfolio. This portfolio is managed by ShareInvestor's Investor-One team. You will be able to see their portfolio returns too. For each stock buy, the team has also put up notes to explain the rationale of buying the stock. One example of a buy for HRnetGroup is seen below:

In the Investor-One portfolio, there are 7 stocks now. Some of the stocks are making money while some are in the red. This is part and parcel of investment and our view should always be for the long term and hope that the winners are more than the losers in the long run. I've learnt over the years that we can never be 100% correct for investments but some financial metrics will guide us to choose the right stocks. Buying companies which are overvalued is a sure way to lose money so its important to refer to some financial ratios such as Price to Earnings (PE) and Price to Book (PB) when choosing stocks to buy. While financial ratios may not be a full-proof way to make money, it does provide some guidance for us not to buy overvalued companies. 

When the market is red hot, it is best to stay out of it so knowing how to use financial ratios to evaluate our investments will stop us from being too greedy. While the stock market is not red hot now, the Singapore property market seems to be with many buyers rushing to buy private properties as new launches for condos get sold out in a matter of days. Even HDB prices are skyrocketing with more and more above 
S$1 Million HDB being sold and buyers willing to fork out cash over valuation of $200K for a HDB which was sold for S$1.2 Million dollars just recently. Paying cash over valuation of 20% is like buying a stock 20% higher than it's PB. 

You can check out Investor-One portfolio page which will be updated when there are new purchases and you'll be able to see how the portfolio performs over the years based on the above financial parameters. 

This post is sponsored by ShareInvestor but all views are of my own