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What should my ultimate goal be in a year after buying a long-term growth stock?

If I bought a stock now, what would be the optimal place you would want it to be at in regards to growth in price in a year?

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December 2018

When you buy a long-term growth stock, you should have in mind at least a 5 year holding period, and probably more like a 10 year period.  So, a review of price change in a year is not the right metric to help your decision making.  More important than the price of the shares are the fundamentals of the company.  Markets (and the price of any stock) can be extremely fickle in the short term and I would consider one year "short term."

Which fundamentals should you track for a growth company?  Growth in sales.  Top line growth is essential to maintaining growth in the value of the stock.  Growth in profits.  If sales are growing, but profits are dipping, share price may begin to suffer.  You need growth in both sales and profits in order to continue growing EPS, which is a key ingredient to the long run value of a stock.  

Another fundamental to track is the PE ratio.  There are many flavors of this measure, but the most important is the forward PE.  This takes into account expected growth in earnings as determined by analysts who follow a stock.  If forward PE gets too high, the stock price may be in excess of fundamental value.  That leaves a stock vulnerable to a pullback. 

Debt levels are another important measure.  Tesla has grown its sales rapidly, for example, but has accumulated high levels of debt.  The company is on record as saying they were only "single-digit weeks" away from bankruptcy.  (We do not own shares of Tesla in our portfolio.)

Buying and selling stocks at the right price is tricky business.  Good luck with your portfolio.

December 2018
December 2018
December 2018
December 2018