Why You Should Focus on Growth Stocks Today / Commodities / Gold and Silver Stocks 2020

By Justin Spittler : My friend who’s a novice investor asked for advice recently. Hewas “bargain hunting” for cheap stocks, and trying to decide betweenbuying Kohl’s (KSS) or ExxonMobil (XOM).

Icringed. “Listen,” I told him. “You’re thinking about this all wrong.”

I getwhere my friend is coming from. From childhood we’re taught to be financiallyprudent. To seek bargains and avoid spending money on expensive things.

Inmost areas of life this is smart advice. Drive a reasonable car, live in areasonable house, book reasonable vacations with your family. But there’s onebig problem.

Mostpeople, like my friend, apply this same mindset to the stock market: andit’s totally wrong! In this issue, I’ll show you which stocks to buyinstead.

“Cheap” Stocks Are Often The Worst StocksYou Can Own

By“cheap,” I mean stocks that have a low stock price in relation to their salesor earnings. If a stock trades for $20/share and earns $4/share, it’s cheap. Ifit trades for $200/share and earns $4/share, it’s not cheap.

Peopleare drawn to “cheap” stocks for the same reason they flock to the Macy’sclearance rack. It feels good to get a deal. Americans love nothing more thangetting lots of “bang for their buck.”

Butin investing, this is a dangerous mistake. These stocks are cheap for a reason!They’re usually in dying industries. So they’re either barely growing, orshrinking.

Consider Kohl’s(KSS), which is getting eaten alive by online shopping. Its sales haveshrunk 25% over the past three years. It’s one of the cheapest stocks in theS&P 500. And its stock has plunged 60% so far this year.

ExxonMobil (XOM) is an “old energy” dinosaur. Itcurrently pays a 10% dividend, leading some folks to believe it’s a bargain.It’s not. The stock has been pummeled 52% since the start of the year.

Andit’s not just Kohl’s and Exxon. With all the craziness and uncertainty going onwith coronavirus, you’d assume investors would be taking shelter in “cheap”companies that’ve demonstrated they can survive uncertain times.

Nameslike Coca Cola (KO), Johnson & Johnson (JNJ),and 3M Company (MMM). Yet these “value stocks” are all down morethan 10% in 2020! In other words, we’re in the middle of a global pandemic… andthese cheap, “safe” stocks aren’t doing their job.

Iknow this is a controversial take, and it flies in the face of how Wall Streetwould like you to think. But when you look at the evidence, it’s crystal clear:“Cheap” does NOT equal “safe” in the stock market.

That’s Why I Focus Almost Exclusively OnGrowth Stocks

Unlikethe cheap stocks I showed you above, these stocks are growing likecrazy. And their share prices are going through the roof!

Take ZoomVideo (ZM). Zoom, as I’m sure you’re aware, brought teleconferencing to themasses. Now, its shares aren’t cheap. In fact, by some metrics, they’re 20times more expensive than the “average” S&P stock.

Butthat hasn’t kept money from pouring into Zoom’s stock. As you can see, it’sraced more than 640% higher this year.

Thisincredible move caught many investors by surprise. But it shouldn’t have. Zoomis one of the fastest-growing companies on the planet.

Lastquarter, it reported a 148% spike in sales. That’s staggering growth for acompany as big as Zoom, which is valued at $132 billion. Of course, it’s notthe only growth stock that’s done phenomenally this year.

Plug Power (PLUG) has skyrocketed 267% thisyear. Its sales have grown 29% per year for the past five years.

Digital Turbine (APPS) is another example. Thecompany is at the forefront of the booming digital advertising revolution. As aresult, its sales soared 93% last quarter, and 38% per year since 2015. Despitethat breakneck growth, APPS is an expensive stock. By one metric, it’s nearlyfive times as expensive as the S&P 500. Digital Turbine has surged 392%this year.

Icould go on and on with examples. But you get my point. Fact is, the average S&P stock grows sales at asluggish 3.5% per year. The right growth stocks cangrow 100%+ a year

See,my friend was asking the wrong question. Sorting through “cheap” stocks is aloser’s game. Instead, you should be looking for the next great growth stock.

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By Justin Spittler

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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